Explore BrainMass
Share

Differences among variable, fixed, marginal and total costs of production

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

ECO 365
I have attached a word document with homework assignments that I am having problems understanding. Could you please provide explanations for the questions? There are 9 questions on the document.

Please answer the following Economics questions 1 through 9.

1. Explain how supply and demand are used to determine market equilibrium.
2. You have been charged with forecasting next year's production run of cell phones for your company, a cell phone manufacturer. Give an example of supply and one of demand that would affect this forecast.
3. Give an example for each of the following: how price elasticity affects an individual's purchasing decision and a firm's pricing decision.
4. What are the differences among variable, fixed, marginal and total costs of production? Why is it important for a manager to know the difference? How is this information used?
5. Utilize a real-world example to explain the law of diminishing marginal productivity.
6. Compare and contrast the major market structures and their characteristics. Give an example of a corporation which aligns with each type of market structure and state why it aligns with its assigned structure.
7. Give a real world example of how global competition affects a firm's strategies for maximizing profits.
8. You have been appointed head economist for the U.S. government. What advice would you give the president on the economy? (Examples: market structures, taxes, rental rate ceilings)
9. How do you feel the outcome of the election will affect the economy? Give two scenarios: one if McCain had won; the other since Obama has won. Address three points for each.

© BrainMass Inc. brainmass.com March 21, 2019, 6:37 pm ad1c9bdddf
https://brainmass.com/economics/supply-and-demand/differences-among-variable-fixed-marginal-total-costs-262820

Attachments

Solution Preview

ECO 365
I have attached a word document with homework assignments that I am having problems understanding. Could you please provide explanations for the questions? There are 9 questions on the document.

Please answer the following Economics questions 1 through 9.

1. Explain how supply and demand are used to determine market equilibrium.
Demand shows the willingness of consumers to purchase products at a given price. It is a relationship between price and quantity demanded which can be seen as a downward sloping line in the graph. At a price Pa, quantity demanded is qa. Supply is an upward slopping curve that signifies the relationship between the amount of the good producers are willing to sell at any given price. At Pa, quantity supplied is q'a. I have chosen an example out of equilibrium P* and q* to show how equilibrium is reached. At Pa, demand is qa and supply is q'a, q'a > qa which means that suppliers are left with a lot of unsold inventory (q'a-qa). That means that they have to decrease their price to clear inventories, which increases demand, decreases the willingness of suppliers to produce so much until they reach the equilibrium position P*, q* at which there is no incentive to move. If the price had been lower, demand would have been higher than supply, driving prices up and encouraging suppliers to produce more until they reached equilibrium.

2. You have been charged with forecasting next year's production run of cell phones for your company, a cell phone manufacturer. Give an example of supply and one of demand that would affect this forecast.
Forecast might be affected by how much input costs are expected to increase the next year. That would affect supply. Demand factors can include such things as whether a new study has come out saying that cell phones might be bad for your health which might decrease the rate at which the market grows.

3. Give an example for each of the following: how price elasticity affects an individual's purchasing decision and a firm's pricing decision.
Price elasticity refers to how sensitive a demand or supply curve are to changes in price. For example, there are some goods that have such an inelastic demand curve that we can tell that an increase in price will not decrease its consumption. One example is cancer medication. It is a matter of life and death and people are unlikely to change their consumption of it (as long as they can buy it) because of a change in price. Firms might choose to increase price when demand is inelastic. A firm whose products have many substitutes, on the other hand, might chose not to increase their price because demand could drop to zero. For ...

Solution Summary

The expert explains how supply and demand are used to determine market equilibrium.

$2.19