Assignment: Principles of Economics: Micro
1. A perfectly competitive firm has the following short-run total cost:
|
Quantity
|
Total Cost
|
AVC
|
ATC
|
MC
|
|
0
|
$5
|
--
|
--
|
--
|
|
1
|
10
|
|
|
|
|
2
|
13
|
|
|
|
|
3
|
18
|
|
|
|
|
4
|
25
|
|
|
|
|
5
|
34
|
|
|
|
|
6
|
45
|
|
|
|
Market demand for the firm's product is given by the following market demand schedule:
|
Quantity
|
Total Cost
|
AVC
|
ATC
|
MC
|
|
0
|
$5
|
--
|
--
|
--
|
|
1
|
10
|
|
|
|
|
2
|
13
|
|
|
|
|
3
|
18
|
|
|
|
|
4
|
25
|
|
|
|
|
5
|
34
|
|
|
|
|
6
|
45
|
|
|
|
a) Calculate this firm's Marginal Cost and, for all output levels except zero, the firm's average variable cost and average total cost.
b) There are 100 firms in this industry that all have identical costs to those of this firm. Derive the SR market supply curve and graph it. In the same diagram, draw the market demand curve. What is the market price, and how much profit will each firm make?
2. In the competitive electrical motor industry, the workers at Galt Inc. threaten to go on strike. In order to avoid the strike, Galt Inc., agrees to pay its workers more. At all other factories, the wage remains the same.
a) What does this do to the marginal cost curve at Galt Inc.? Does it rise, does it fall, or is there no change? Illustrate your answer in the figure below.
b) What will happen to the number of motors produced by Galt Inc.? Indicate the "before" and "after" levels of output on the x-axis in the figure above.
c) In this competitive market, what will the Galt Inc., labor agreement do to the price of motors?
d) Surely, more workers will want to work at Galt Inc., now that it pays higher wages. Will more workers actually work at Galt Inc. after the labor agreement is struck? Why or why not?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.