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Marginal Cost Analysis

1) The average variable cost is AVC = 3500 - 6Q + 0.005Q2

a. If the industry is competitive, estimate the shut down price.
b. If the market price is below the shut down price, regardless of fixed cost, explain why the firm should shut down.
c. Using this information, draw the firm's short run supply function.

2) The price elasticity of demand for a textbook sold in the United States is estimated to be -2.0, whereas the price elasticity of demand for books sold in overseas markets is -3.0. The U.S. market requires hardcover books with a marginal cost of $24.00 while the overseas market is normally served with soft-cover texts having a marginal cost of only $18.00. Calculate the profit maximizing price in each market. How might these prices become equal?


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Please see the attached file.

1)In a statement of cash flow, the term cash includes:
A) only money on deposit in bank accounts(B)on bank accounts and cash on hand(C) bank accounts, cash on hand, and cash equivalents(D) bank accounts, cash on hand, and cash equivalents and marketable securities classified on current assets

Answer: This is be definition of cash

2) The ownership of common stock in a corporation usually carries the following rights:
A)To vote for directors (B) To declare dividends (C) To share in a distribution of assets if the corporation is to be liquidate (D) both a and c

Answer: This is be definition of common stock

3)If the current assets are $90,000 and the current liabilities are $30,000 working capital will be
A)33.3% (B) 3:1 (C) $60,000 (D) $120,000

Answer: Working Capital = Current Assets - Current Liabilities

Carlyle, Co. had the following transaction during the month of August,2004
-Cash received from the bank loans was $5,000
-Dividends of $2,500 were paid to stockholders in cash.
-Revenues earned and received in cash amounted to $9,500
-Expenses incurred and paid were $7,000

4) Refer to the above data .What amount of net income will be reported on an income statement for the month of August, 2004?
A) $5,000 (B) $2,500 (C) $0 (D) $9,500

Answer: Net Income = Revenue - Expenses - Dividends

5) The field of accounting may best be describe as:
A) Recording the financial transactions of an economics entity.(B) Develop information in conformity with generally accepted accounting principle(C) The art of interpreting, measuring and describing economic activity(D) Developing the information required for the preparation of income tax return

Answer: By definition of accounting

During 2006, the cash flows related to Dodge Data Inc;s lending and borrowing activities are summarized as the follows:
Cash lent to ...

Solution Summary

The solution answers two questions related to marginal cost analysis.