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Output & Costs


Please refer attached file for diagram. The accompanying diagram shows the demand, marginal revenue and marginal cost of a monopolist. a.Determine the profit maximizing output and price. b. What output and price would prevail if the product was sold by price taking firms in a perfectly competitive market? c. Calculate

Business Strategy for American Airlines

Between 1995 and 1997, American Airlines competed in the Dallas/Fort Worth Airport against several other low-cost carriers. In response to these low-cost carriers, American Airlines reduced its price and increased service on selected routes. As a result, one of the low-cost carriers stopped service, which led American Airlines t

Economic Scenario

Two partners who own Progressive Business Solutions, which currently operates out of an office in a small town near Boston, just discovered a vacancy in an office building in downtown Boston. One of the partners favors moving downtown because she believes the additional business gained by moving downtown will exceed the higher r

Microeconomics: Dividends

Clinton Co. has just paid a dividend of $2.50 per share. The dividends are expected to grow at a constant rate of 6% per year for ever. If the stock is currently selling for $50 per share, calculate the cost of equity for the firm.

Inverse Market Demand Curve

You are the manager of a firm that has an exclusive license to produce your product. The inverse market demand curve is P = 900-1.5Q. Your cost function is C(Q)=2Q+Q^2. Determine the output you should produce, the price you should charge, and your profits.

Should I start a new business?

I am exploring the option of starting my own business. In addition to creating a business plan (which I am not quite sure how to do), I am reviewing factors and costs. What should be the 10 most important factors and costs and further, name 3 implicit and 3 explicit costs to consider. I have what I believe to be good options

Cost-Plus Pricing at Wendel Stove Company

Cost-Plus Pricing. Wendel Stove Company is developing a "professional" model stove aimed at the home market. The company estimates that variable costs will be $2,000 per unit and fixed costs will be $10,000,000 per year. Required a. Suppose the company wants to set its price equal to full cost plus 30 percent. To determine

Socially Desirable Method of Taxing Monopolists

It has been proposed that natural monopolists should be allowed to determine their profit maximizing outputs and prices and then government should tax their profits away and distribute them to consumers in proportin to their purchases from the monopoly. Is this proposal as socially desirable as requiring monopolists to equate pr

Calculating Breakeven Point and Profits

The fixed costs at Harley Motors are $1 million annually. The main product has revenue of $8.50 per unit and $4.25 variable cost. Determine the following. (a) Breakeven quantity per year. (b) Annual profit if 200,000 units are sold and in 350,000 units are sold. Plot total revenue and costs at these leve

Government - Pollution Rights

In the 1990s the Mobil Oil Corporation acquired the rights to increase their pollution by 900 pounds of sulfur-dioxide per day at their Torrance, California refinery. These rights were purchased from South Gate, California, at a price of $3 million after the latter acquired them from General Motors. As a result of this change, M

Pollution Credits

In the 1990s the Mobil Oil Corporation acquired the rights to increase their pollution by 900 pounds of sulfur-dioxide per day at their Torrance, California refinery. These rights were purchased from South Gate, California, at a price of $3 million after the latter acquired them from General Motors. As a result of this change, M

External Cost

Suppose the external marginal cost of pollution is MCext = 5Q and the internal marginal cost is MCint = 10Q . Further, assume the inverse demand for the product, Q, is given by P = 90-Q . a. What is the socially efficient level of output? b. How much output would a competitive industry produce? c. How much output would

Microeconomic Problem: Analyzing Production Functions

Making dresses is a labor-intensive process. Indeed, the production function of a dressmaking firm is well described by the equation Q=L-L^2/800, where Q denotes the number of dresses per week and L is the the number of labor hours per week. The firm's additional cost of hiring an extra hour of labor is about $20 per hour (wage

A Company's Cost of Equity Capital

Common stocks issued by Henry Harmon Builders paid stockholders $0.93 per share on an average price of $18.80 last year. The company expects to grow the dividend rate at a maximum of 1.5% per year. The stock volatility of 1.19 is somewhat higher than that of other public firms in the construction industry,and other stocks in thi

Production Function

Suppose that the production of crayons q is conducted at 2 locations and uses only labor as an input. The production function in location 1 is given by q1=10L1 1/2(exponent) and location 2 by q2=50 L2 1/2(exponent). a. If a single firm produces crayons in both locations, then it will obviously want to get as large an output a

Net Benefit Difficulty with Economics

The estimated annual cash flows for a proposed city governement project are costs of $450,000 per year, benefits of $600,000 per year, and disbenefits of $100,000 per year. Determine the (a) B/C ratio and (b) value of B - C. Need to show excel formula

Analyzing costs and revenues of a loss making firm

The firm currently uses 50,000 workers to produce 200,000 units of output per day. The daily wage worker per worker is $80.00, and the price firm is $25.00. The cost of other variables input is $400,000 per day. Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total cost exceeds its

Micro Economics

Please show your work so I can gain an understanding of the process. Thanks

Average vs marginal productivity

What is average productivity? What is marginal productivity? Explain the relationship between marginal and average productivity. What would happen to marginal and average productivity if a technological innovation is introduced to the production process? Provide examples (numerical and graphical if you can) to explain your answe

Inputs and Outputs

The following production table provides estimates of the maximum amounts of output possible with different combinations of two input factors, X and Y. (Assume these are just illustrative points on a spectrum of continuous input combinations.) Units of Y Used Estimated Output per Day 5 184 265 334 395 440 4 176 248 303 3


Presented below are a number of accounting procedures and practices in Sanchez Corp. For each of these items, list the assumption, principle, information characteristic, or modifying convention that is violated. 1. Because the company's income is low this year, a switch from accelerated amortization to straight-line amortizatio

Rate of return of miniature fittings and valves

Swagelok Enterprises is a manufacturer of miniature fittings and valves. Over a 5-year period, the costs associated with one product line were as follows: first cost of $30,000 and annual costs of $18,000. Annual revenue was $27,000, and the used equipment was salvaged for $4000. What rate of return did the company make on this

Incremental analysis

Pro Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2008, the company reported the following operating results while operating at 90% of plant capacity and producing 112,500 units. Amount Sales $4,500,000 Cost of goods sold 3,600,000 Selling and adminis

Present Worth Analysis

Two methods can be used for producing expansion anchors. Method A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 per year. Method B will have a first cost of $120,000, an operating cost of $8000 per year, and a $40,000 salvage value after its 3-yea

PV of cash flows

A consulting engineering firm is considering two models of SUVs for the company principals. A GM model will have a first cost of $26,000, an operating cost of $2000, and a salvage value of $12,000 after 3 years. A Ford model will have a first cost of $29,000, an operating cost of $1200, and a $15,000 resale value after 3 years.

calculate the PVIFA

The cost associated with maintaining rural highways follows a predictable pattern. There are usually no costs for the first 3 years, but thereafter maintenance is required for restriping, weed control, light replacement, shoulder repairs, etc. For one section of a particular highway, these costs are projected to be $6000 in year


1. Which of the following occurs if firms are able to restrict output and raise price? a. resources are misallocated b. wealth is shifted from consumers to government c. wealth is shifted from producers to consumers d. P = MC 2. Production by a monopoly would result in the socially optimal allocation of resources i

Cost Structure of a Perfectly Competitive Firm

In a perfectly competitive industry, the market price is $25. A firm is currently producing 10,000 units of output, its average total cost is $28, its marginal cost is $20, and its average variable cost is $20. Given these facts, explain whether the following statements are true or false: a. The firm is currently producing

Calculating Accounting and Economic Profits

Jane decided to resign from her current job, at which she earned $58,000 per year. She started her own business using her $100,000 savings on which she was earning 5 % interest. In the first year, her revenue was $150,000 and her costs were as follows: Rent: $25,000 Utilities: $12,000 Wages: $30,000 Materials: $20,

Quadratic Functions

If total cost, T(X), is related to output, X, by the equation: T(X) = 0.001X2 + 0.5X + 50 a.What is the variable cost function? b.What is the average cost function? If output is 100 units, find a.Total fixed cost; b.Total variable cost; c.Total cost; d.Average cost; e.Marginal cost of the 100th unit. A