1. A firm making external hard drives has a cost function c(y) = 4y + 1000....
1. A firm making external hard drives has a cost function c(y) = 4y
+ 1000. Its demand function is y = 200 – 0.8p.
a. Calculate the profit-maximizing price and quantity. (3
points)
b. The firm decides to enter the Mexican market. It determines that
its demand function in Mexico is y = 40 – p. The cost function
remains the same. What price should it charge in Mexico, and what
quantity should it sell? (3 points)
c. Would you say the firm is price discriminating? Why or why not, and if yes what type of price discrimination is this? If people began trading these hard drives freely between the US & Mexico, what would happen to the price? (Add the two demand functions together to get a combined demand function for both countries.) Would total surplus be higher or lower than when the hard drives were not being traded across the border, and why?
Homework Answers
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1. A firm making external hard drives has a cost function c(y) = 4y
+ 1000....
A competitive firm has a cost function given by c(y)=2y2+98 and marginal cost of MC(y)=4y. What...
A competitive firm has a cost function given by
c(y)=2y2+98 and marginal cost of MC(y)=4y.
What is the firm's supply function?
Choose one:
A. p(y)=4y
B. y(p)=(p)/4
C. p(y)=2y2+98
D. p(y)= (p-98)/(4)
How many units will the firm supply if the price is
$32?
What if the price is $12?
What is the firm's profit when the price is
$32? $
What is profit when the price is $12? $
At what price and quantity will the firm break even?...
A monopolist has a cost function given by c(y) = y and faces an inverse demand...
A monopolist has a cost function given by c(y) = y and faces an inverse demand curve given by P(y) = 156.00 - y, where P is the per-unit price and y is the quantity of output sold. Assume this monopolist cannot discriminate and charges a single price. What is the profit-maximizing level of output? What is its profit-maximizing price? $ Part 2 (2 points) See Hint Assume you want to choose a price ceiling for this monopolist so as...
Suppose each firm producing standard paper has a monthly cost function C(qi) = 50qi2 + 50...
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Suppose a firm in a perfectly competitive market has the cost function c(y)=y2 + 2y +4...
Suppose a firm in a perfectly competitive market has the cost function c(y)=y2 + 2y +4 Now suppose that there is a sudden increase in demand that raises the market price to p= 8. If the demand stays at this new level, what will the long-run quantity be for each firm?
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1. Each firm in a perfectly competitive industry has the long-run total cost function c(y) = 3y - (y^2/3) + (y^3/27) Demand is given by the inverse demand curve p = 15 - (Qd/600). Calculate, for the long-run equilibrium, a. The price b.The market quantity c. The number of firms d. The profit for each firm
**Only [Harder] Question** Problem 2. Consider a firm that has a cost function of c(y) =...
**Only [Harder] Question** Problem 2. Consider a firm that has a cost function of c(y) = 5y 2 + 50, 000. In other words, this is a firm with a fixed cost of $50,000 (which might be something like the cost of rent on the firm’s building, which they have to pay whether they produce any output or not) and a variable cost of $5Y 2 , (which we’ll think of as the cost of the labor and machinery necessary...
2. Consider a market with one firm. The firm's cost function is c(g)-2, and the market...
2. Consider a market with one firm. The firm's cost function is c(g)-2, and the market demand is Q 1000-P (a) Suppose the monopolist does not exereise any market power and behaves like a competitive firm. Find the equilibrium price, the quantity produced and the firm's profit. (b) Suppose the monopolist exercises market power but does not price dis- criminate (that is, the firm uses MR MC pricing strategy). Find the price the firm charges, the quantity produced, and the...
Suppose the cost function of a firm is given by c(y) = y 3 + 16...
Suppose the cost function of a firm is given by c(y) = y 3 + 16 for y > 0 and c(0) = 0. (a) Derive the Marginal Cost and Average Total Cost functions. (b) Find is the lowest price at which the firm will produce a positive quantity. (c) Derive the firm’s supply function y(p). (d) Draw the firm’s Average Total Cost and Marginal Cost curves. On your graph, determine the firm’s supply curve. Your graph should have output...
Suppose a firm with cost structure c(y)= y2 + 2y +4 is the only producer of...
Suppose a firm with cost structure c(y)= y2 + 2y +4 is the only producer of the good in the market. Market demand is given as y(p)= 40 - 2p What is the profit-maximizing quantity for this firm? Suppose a firm with cost structure c(y)= y + 2y + 4 is the only producer of the good in the market. Market demand is given as y(p)= 40 - 2p What price will the firm charge? Suppose a firm with cost...
A competitive firm has a cost function given by
c(y)=2y2+98 and marginal cost of MC(y)=4y.
What is the firm's supply function?
Choose one:
A. p(y)=4y
B. y(p)=(p)/4
C. p(y)=2y2+98
D. p(y)= (p-98)/(4)
How many units will the firm supply if the price is
$32?
What if the price is $12?
What is the firm's profit when the price is
$32? $
What is profit when the price is $12? $
At what price and quantity will the firm break even?...
A monopolist has a cost function given by c(y) = y and faces an inverse demand curve given by P(y) = 156.00 - y, where P is the per-unit price and y is the quantity of output sold. Assume this monopolist cannot discriminate and charges a single price. What is the profit-maximizing level of output? What is its profit-maximizing price? $ Part 2 (2 points) See Hint Assume you want to choose a price ceiling for this monopolist so as...
Suppose a firm in a perfectly competitive market has the cost function c(y)=y2 + 2y +4 Now suppose that there is a sudden increase in demand that raises the market price to p= 8. If the demand stays at this new level, what will the long-run quantity be for each firm?
2. Consider a market with one firm. The firm's cost function is c(g)-2, and the market demand is Q 1000-P (a) Suppose the monopolist does not exereise any market power and behaves like a competitive firm. Find the equilibrium price, the quantity produced and the firm's profit. (b) Suppose the monopolist exercises market power but does not price dis- criminate (that is, the firm uses MR MC pricing strategy). Find the price the firm charges, the quantity produced, and the...
Suppose a firm with cost structure c(y)= y2 + 2y +4 is the only producer of the good in the market. Market demand is given as y(p)= 40 - 2p What is the profit-maximizing quantity for this firm? Suppose a firm with cost structure c(y)= y + 2y + 4 is the only producer of the good in the market. Market demand is given as y(p)= 40 - 2p What price will the firm charge? Suppose a firm with cost...
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