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Output & Costs

Foundations of Microeconomics: Discussing Consumers and Firms

You've been hired by an unprofitable firm to determine whether it should shut down its unprofitable operation. The firm currently uses 70,000 workers to produce 300,000 units of output per day. The daily wage (per worker) is $100, and the price of the firm's output is $30. The cost of other variable inputs is $500,000 per day

Improve Profitability Incentive Pay

Incentive Pay at Handmade Scarves Individual artisans make fashionable scarves at Handmade Scarves. Each scarf sells for a price of $50. On average one hour of effort will produce one additional scarf. The monetary value (in dollars) of an artisan's output of scarves (Q) per period is a function of the artisan's level o

monopolistis quantity, price and profit

A monopolist has a constant marginal and average cost of $10 and faces a demand curve of QD = 1000-10P. Marginal revenue is given by MR = 100 -1/5Q. Calculate the monopolist's profit-maximizing quantity, price and profit.


1. Do you think the overall level of R&D would increase or decrease over the next 20 to 30 years if the lengths of new patents were extended from 20 years to, say "forever"? What if the duration was reduced from 20 years, to say, 3 years? Which situation would create more monopoly power in the market? 2. How does monopolist

Answers two questions about opportunity cost.

1. Economists make decisions by thinking in terms of alternatives. Why do economists believe there is no such thing as a free lunch? 2. Another situation to think about: Should Michael Phelps mow his own lawn? Suppose Michael can mow his lawn in 30 minutes (due to his athletic ability) or he can hire a gardener who can do th

Monopolies, Oligopolies and Market Structure

I would appreciate any help that I can get with the following questions. 1. Patent laws a. reduce incentive to innovate by restricting market entry b. reduce incentive to innovate by making it difficult to use the patented innovation c. increase incentive to innovate by restricting entry into a marke

San Joaquin Community Hospital is a nonprofit hospital operated by the county.

San Joaquin Community Hospital is a nonprofit hospital operated by the county. The hospital's administration is considering a proposal to a new outpatient clinic in the nearby city of San Marco. The administrator has made the following estimates pertinent to the proposal: 1. Construction of the clinic building will cost $7800

Decision tree listing profit outcomes

ABC Firm faces uncertain revenues and uncertain costs. Its revenue may be $115million, 155million, Or 165 Million, with chances of 0.2, 0.30 and 0.5, respectively. Its costs are $140 or $160 million with chances of 0.55 and 0.45, respectively. Revenues and cost are independent. (a) Calculate the firm's expected values and st

Microeconomics - Level of Output and Profit

Assume a firm in the short run under perfect competition with P=250, TC=1,000 + 100Q + 2.5Q^2 , and MC=10+5Q Determine the level of output that the firm needs to produce to maximize profits? Determine the level of profits at the profit maximizing level of output.

Managerial Economics

Here is the information you need to answer the question. This information is taken from a graph. So you will need to draw the graph to answer the questions. The best level of output for the monopolist in the short run is 500 units and is given by point E where MR=MC. At Q=500, P=$11 and ATC=$8 so that the monopolist earns a prof

Cost of Capital & Debt

A. Generally, which of the following is true? (where rE is the cost of equity, rD is the cost of debt and rA s the cost of capital for the firm. A. rD> rA> rE B. rE> rD> rA C. rE> rA> rD D. None of the above is true B. If a firm is unlevered and has a cost of equity capital 9%, what would the cost of equity be

Effects on the Isoquant and Isocost of a reduction in wages

Suppose that as the result of recent labor negotiation, wage rates are reduced by 10% in a production process employing only capital and labor. Assuming the other conditions (productivity for example) remain constant, determine what effects this decrease will have on the desired proportions of capital and labor used in producin

profit-maximizing, monopolist

5. Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will: A. realize a profit of $4 per unit of output. B. maximize its profit by producing in the short run. C. minimize its losses by producing in the short run. D. shut down in the short run. 9. If a non-discriminati

Deciding whether to continue to operate a firm at a loss

You've been hired by an unprofitable firm to determine whether it should shut down its unprofitable operation. The firm currently uses 50,000 workers to produce 200,000 units of output per day. The daily wage (per worker) is $80, and the price of the firm's output is $25. The cost of other variable inputs is $400,000 per

Opportunity Cost

Define the term "opportunity cost." Now that you have a definition of opportunity cost weigh the positives and negatives of taking a leave of absence from work and moving out of town to attend college full time, or maintaining your job while attending college. What is your conclusion?

Challenge Case

As APEX anticipates significant increases in demand for PVC pipe, it is considering two alternatives: Plan A: Produce all PVC in Illinois, and provide nationwide distribution from that one site. Plan B: Produce PVC pipe both at one plant in Illinois and one plant in Colorado. Distribute east of the Mississippi from Illinois

Perfectly Competitive Firm

Assume a perfectly competitive firm is producing 300 units of output, P = $10, ATC of the 300th unit is $8, marginal cost of the 300th unit = $10, and AVC of the 300th unit = $6. Based on this information, the firm is: A) earning an economic profit of $600. B) earning an economic profit of $1,200. C) incurring a

Cost Functions

Which of the following statements is correct concerning the relationships among the firm's total cost functions? A) TC = TFC - TVC B) TVC = TFC - TC C) TFC = TC - TVC D) TC = TVC - TFC

Incremental profit

Universal Audio manufactures car speakers that it sells to other resellers that then customize and distribute the product to retailers that sell hi-fi auto equipment. The yearly volume of output is 300,000 pairs. The selling price and cost per unit are shown below: Selling price $150 Costs: Direct material $25 Direct labor

Market demand (perfectly competitive market)

Consider a market in which the demand curve is given by: P = 500 - 12Q Average and marginal cost are both a constant of 20. a.What is the perfectly competitive price? b.What is the elasticity of market demand at the competitive price? c.If the market is perfectly competitive, what is the elasticity of demand facing an

Microeconomics Production Question

Suppose there are two goods, video cassettes and record albums, produced by firm A and firm B. Suppose the marginal rate of product transformation (RPT) of record albums for video cassettes in firm B is 2(That is, firm B can always trade 2 video cassettes for 1 record album in production). On the other hand, the RPT in firm A is

Merger and profitability

The market for a standard-sized cardboard container consists of two firms: BooBox and Flimflax. As manager of BooBox you enjoy patented technology that permits your company to produce boxes faster and at lower cost than Flimflax. You use this advantage to be first to choose profit-maximizing output level in the market. The i

Costs Analysis Problem

Use the following equations to demonstrate why a firm producing at the output level where MR = MC will also be able to maximize its total profit (i.e., be at the point where marginal profit is equal to zero). Note: To prove this, you must first present the algebraic expression for the profit function, and then the first-order

Activity Rates

As You Like It Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of cu

Monopoly and Four Firm Concentration Ratio

1). Suppose the demand curve for a monopolist is Qd = 500 - P, and the marginal revenue function is MR = 500 - 2Q. The monopolist has a constant marginal and average total cost of $50 per unit. a). Find the monopolist's profit-maximizing output and price. b). Calculate the monopolist's profit. c). What is the Lerner ind

Average variable cost

The cost structure of a manufacturer of cable modems is described in the following table. The firms fixed cost equal $10 per day. See the attachment. Calculate the average variable cost, average fixed cost, and average total cost at each output level.

Maximizing Profits

A monopolist faces a marginal revenue function of MR = 20 - Q. The marginal cost is $15 at all levels of output. How many units should be produced to maximize profits?


The fully allocated cost of a product is $45. If the firm uses a markup of .30 what should it charge for the unit price?