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# Output & Costs

### Marginal Cost of E-Books

Consider the preferred prices of the authors and publishers of an electronic book, whose marginal cost of production is close to zero? Would the two disagree about the price to be charged for the book?

### Pricing and Output Decisions: Perfect Competition and Monopoly

Following is the graphical representation of a short run situation faced by a perfectly competitive firm. Is this a good market for this firm to be in? Explain. What do you expect will happen in the long run? Explain. See the attachment for graph.

### Optimization: output, marginal cost, average cost, price

Please help with the following problem. Optimization: Giant Screen TV, Inc, is a manufacturer and distributor of high-resolution 50-inch television monitors and consoles for individual and commercial customers. Revenue and cost relations are: TR = \$4,500Q - 0.1Q^2 MR = \$4,500 - 0.2Q TC = \$2,000,000 + \$1,500Q + 0.5Q^2 MC

### Antitrust authorities at the Federal Trade Commission are reviewing your company's recent merger with a rival firm. The FTC is concerned that the merger of two rival firms in the same market will increase market power. A hearing is scheduled for your company to present arguments that your firm has not increased its market power through this merger. Can you do this? How? What evidence might you bring to the hearing?

Antitrust authorities at the Federal Trade Commission are reviewing your company's recent merger with a rival firm. The FTC is concerned that the merger of two rival firms in the same market will increase market power. A hearing is scheduled for your company to present arguments that your firm has not increased its market power

### Pricing and Output Decision Making

Respond to the following: a. In certain industries, firms buy their most important inputs in markets that are close to perfectly competitive and sell their output in imperfectly competitive markets. b. Cite as many examples as you can of these types of businesses. c. Explain why the profits of such firms tend to increase wh

Respond to the following: a. Suppose the following was overheard at the water cooler: "I think our medical device company should take advantage of economies of scale by increasing our output, thereby spreading out our overhead costs." b. Would you agree with this statement (assuming this person is not your boss)? Why or why no

### Analyzing the Models of Oligopoly

Discuss a scenario where price fixing is beneficial to all parties involved - including consumers. Provide specific examples to support your response. Analyze the models of oligopoly.

### Managerial Economics (MBA)

A copy company wants to expand production. It currently has 20 workers who share eight copiers. Two months ago, the firm added two copiers, and output increased by 100,000 pages per day. One month ago, they added five workers, and productivity also increased by 50,000 pages per day. Copiers cost about twice as much as workers. W

### Profit Maximization

The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, the Star competes with The Wall Street Journal, USA Today, and the New York Times for national news reporting, but the Star offers readers stories of local interest, such as local news, weather, high-school sporting events, and so on. The El Dorado Sta

### A perfectly competitive market

Please help with the following: Discuss how a company that is competing in a purely (or perfectly) competitive market should increase its competitive stance in the marketplace. Provide specific examples. Determine how a perfectly competitive firm can maximize its profit by producing the output at which average cost is min

### Benefit Cost Ratio of a New Park

A new park has been proposed in a downtown business district. To build the park, several businesses will have to be reallocated. This process will disrupt the business for about six months and cause a loss of income of approximately \$100,000. The new park will cost about \$1,200,000 to build and will cost about \$50,000 annually f

### 1. The effect of sunk costs on decision making 2. Utility maximization when wages rise

People join tennis clubs for a fixed fee per year, which entitles them to play as much as they want without charge. Because people who pay these fees play more tennis than others (who can use free public courts), this means sunk costs matter for decisions. Right? When discussing the maximization of utility, regardless of whet

### Fee-For-Service, Per Diem & Fixed Fees: Hospital Example

How will each of the following bases for hospital reimbursement affect the number of admissions, the average length of stay, the volume of services per day, and the unit cost of services (cost per service): a. fee-for-service reimbursement b. per diem reimbursement c. fixed fee per admission

### Aggregate Supply in the short run and long run

Answer the following questions on the basis of three sets of data for the country of North Vaudeville: a. Which set of data illustrates aggregate supply in the immediate short-run in North Vaudeville? The short run? The long run? b. Assuming no change in hours of work, if real output per hour of work increases by 10 percen

### Managerial Economics

The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, the Star competes with The Wall Street Journal, USA Today, and the New York Times for national news reporting, but the Star offers readers stories of local interest, such as local news, weather, high-school sporting events, and so on. The El Dorado S

### Cartel Rationalized Agreements

(Coffee Pricing Agreement Dissolves amidst Dilemma) When coffee bean harvest is larger than projected, the top Colombia and Brazilian coffee producers along with several African and Central American smaller producers often agree in principle to withhold millions of tons of coffee beans from the market in an effort to raise c

### Variable costs and shutdown calculations

Say half of the cost of producing wheat is the rental cost of land (a fixed cost) and half is the cost of labor and machines (a variable cost). If the average total cost of producing wheat is \$8 and the price of wheat is \$6, what would advise a farmer to do?

### Calculating Marginal Costs with Excel

Using the given table, find the quantity where MC = ATC. Find the quantity where ATC is at its minimum. Find the quantity that is the most efficient operating point for the firm. The table Output Costs TFC TVC AFC AVC ATC MC 0 \$100 1 \$150 2 \$225 3 \$230 4 \$300 5 \$400

### Calculating Average and Marginal Costs

See the attached file. Policy Associates, Inc. (PA) is a policy analysis firm that produces policy reports hiring analysts who scrutinize datasets. Its production function is : Q(D,L)=(0.10)D^(1/2)L^(3/4) Where Q is the number of policy reports it produces, L is the number of policy analysts it hires, and D is the numbe

### Step-Down Method

Using the following example, allocate service center costs to each of the three revenue centers using the step-down method: Full-time

### mark up pricing

Many retail companies use mark up pricingââ?¬"setting price some percentage above variable cost (such as 50% above cost). a. Why do so many firms use this? b. Under what conditions would it be profit maximizing? c. How should it be implemented in order to make it profitable? d. How should set the mark up?

### Microeconomic Questions

When Burger Barn hires one worker, 20 customers can be served in an hour. When Burger Barn hires two workers, 50 customers can be served in an hour. The marginal product of the second worker is _______ customers served per hour. a) 15 b) 30 c) 20 d) 25 Suppose that in 1999 ABC Corp produced 500 million units of a

### Determine whether a firm should shut down, and how many workers it would have to lay off in order to break even.

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 day. Assume that total fixed cost equals \$1,000,000. Calculate the values for the following four formulas: Total Va

### MicroChips Corp has enjoyed substantial economic profits derived from patients covering a wide range of inventions and innovations for microprocessors used in high performance desktop computers. A recent introduction, the Penultimate has proven especially profitable. Market demand and marginal revenue relations for the product are as follows: P=\$5,500-\$0.005Q MR=change TR/changeQ=\$5,500-\$0.01Q Fix cost are nil because research and development expenses have been fully amortized during previous periods. Average variable cost are constant at \$4,500 per unit. A.Calculate the profit-maximizing price output combination and economic profits if Microchips enjoys an effective monopoly because of patent protection. B. Calculate the price-ouptut combination and total economic profits that would result if competitors offer clones that make the market perfectly competitive.

MicroChips Corp has enjoyed substantial economic profits derived from patients covering a wide range of inventions and innovations for microprocessors used in high performance desktop computers. A recent introduction, the Penultimate has proven especially profitable. Market demand and marginal revenue relations for the product a

### Alternative wage

Consider a sharecropper whose contract calls for him to receive ¾ of the output produced in the farm on which he works. Suppose that the value of the marginal product of labor on the shared cropped land is given by 80-L. Where L stands for hours of work . The alternative wage that he can receive elsewhere is 40 rupees. Assume t

### Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Inventory, May 1 \$ 160,000 Purchases (gross) 640,000 Freight-in 30,000 Sales 1,000,000 Sales returns 70,000 Purchase discounts 12,000 Instructions (a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales. (b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost.

Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May. Inventory, May 1 \$ 160,000 Purchases (gross) 640,000 Freight-in 30,000 Sales 1,000,000 Sal

### Monopoly

A high-end lamp monopolist operates in the Mid-West where the demand for lamps is given by Q1=200-P1. Producing one lamp costs 10 per unit. (a) Derive the profit maximizing price and the profits at this price. (b)What is the demand elasticity at this price? Suppose now that the monopolist has the opportunity to expand

### Optimal Pricing and Consumer Surplus at a Gym

Suppose that the monthly individual demand of hours spent in a gym is D: Q =50-P and for the gym the total cost of a customer is TC=10. Find the optimal price and quantity with standard pricing. Which is the per-customer profit for the gym? What is the consumer surplus?

### Accounting vs Economic profit, with examples of each.

1. What is the law of diminishing returns? Can you give an example of when diminishing returns have set in (could set in) at a work place? 2. What is the difference between economic profits and accounting profits? Can you give examples of costs (opportunity or explicit) you think your firm overlooks/might overlook when it

### Diminishing marginal product

Complete table Number of Workers Total Output (Total Product) Marginal Product of Labor Average Product of Labor 1 12 12 12 2 14 3 42 4 14 5 13.6 6 10 7 84 8 4 9 10 10 1 11 91 a. At what point (in terms of workers) do we see evidence of diminishing marginal product? b. Is the slope of the