Question 1:
A. Based on the following table, what is the profit maximizing output?
|
Output
|
Price
|
Total Costs
|
|
0
|
$ 10
|
$ 31
|
|
1
|
10
|
40
|
|
2
|
10
|
45
|
|
3
|
10
|
48
|
|
4
|
10
|
55
|
|
5
|
10
|
65
|
|
6
|
10
|
80
|
|
7
|
10
|
100
|
|
8
|
10
|
140
|
|
9
|
10
|
220
|
|
10
|
10
|
340
|
B. How would your answer change if, in response to an increase in demand, the price of the good increased to $15?
Question 2: A monopolist with a straight-line demand curve finds that it can sell two units at $12 each or 12 units at $2 each. Its fixed cost is $20 and its marginal cost is constant at $3 per unit.
a) Draw the MC, ATC, MR, and demand curves for this monopolist.
b) At what output level would the monopolist produce?
c) At what output level would a perfectly competitive firm produce?
Question 3: Suppose a monopolistic competitor in long-run equilibrium has a constant marginal cost of $6 and faces the demand curve given in the following table:
|
Q
|
20
|
18
|
16
|
14
|
12
|
10
|
8
|
6
|
|
P
|
$ 2
|
4
|
6
|
8
|
10
|
12
|
14
|
16
|
a. What output will the firm choose?
b. What will the monopolistic competitor’s average Fixed cost at the output it chooses?
Question 4: The pizza market is divided as follows:
|
Pizza Hut
|
20.7%
|
|
Domino's
|
17.0
|
|
Little Caesars
|
6.7
|
|
Pizza Inn/Pantera's
|
2.2
|
|
Round Table
|
2.0
|
a) How would you describe its market structure?
b) What is the approximate Herfindahl index?
c) What is the four-firm concentration ratio?