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    Tutorial 7

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    che bunga
    1. The growing world population is influencing the global wheat market and individual wheat farmers by increasing demand for wheat. More people means more demand for wheat as a staple food. Individual wheat farmers benefit from higher wheat prices that result from increased demand. 2. This figure represents a perfectly competitive firm. The marginal cost curve indicates variable costs and the average total cost curve shows total costs. The profit-maximizing output is where marginal revenue equals marginal cost. 3. If Bianca spends $50 per day on advertising to increase sales from 10 bags to 25 bags per day at $5 per bag, her economic profit will increase. Her average total cost will decrease with higher output. She will keep her price at

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    Tutorial 7

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    che bunga
    731 views3 pages
    1. The growing world population is influencing the global wheat market and individual wheat farmers by increasing demand for wheat. More people means more demand for wheat as a staple food. Individual wheat farmers benefit from higher wheat prices that result from increased demand. 2. This figure represents a perfectly competitive firm. The marginal cost curve indicates variable costs and the average total cost curve shows total costs. The profit-maximizing output is where marginal revenue equals marginal cost. 3. If Bianca spends $50 per day on advertising to increase sales from 10 bags to 25 bags per day at $5 per bag, her economic profit will increase. Her average total cost will decrease with higher output. She will keep her price at

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    TUTORIAL QUESTION FOR MACROECONOMY

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    1. The growing world population is influencing the global wheat market and individual wheat farmers by increasing demand for wheat. More people means more demand for wheat as a staple food. Individual wheat farmers benefit from higher wheat prices that result from increased demand. 2. This figure represents a perfectly competitive firm. The marginal cost curve indicates variable costs and the average total cost curve shows total costs. The profit-maximizing output is where marginal revenue equals marginal cost. 3. If Bianca spends $50 per day on advertising to increase sales from 10 bags to 25 bags per day at $5 per bag, her economic profit will increase. Her average total cost will decrease with higher output. She will keep her price at

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    731 views3 pages

    Tutorial 7

    Uploaded by

    che bunga
    1. The growing world population is influencing the global wheat market and individual wheat farmers by increasing demand for wheat. More people means more demand for wheat as a staple food. Individual wheat farmers benefit from higher wheat prices that result from increased demand. 2. This figure represents a perfectly competitive firm. The marginal cost curve indicates variable costs and the average total cost curve shows total costs. The profit-maximizing output is where marginal revenue equals marginal cost. 3. If Bianca spends $50 per day on advertising to increase sales from 10 bags to 25 bags per day at $5 per bag, her economic profit will increase. Her average total cost will decrease with higher output. She will keep her price at

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    GT00703 SEM 1 2016/2017

    TUTORIAL 8

    Answer all questions.

    1. Explain and illustrate graphically how the growing world population is influencing the
    world market for wheat and a representative individual wheat farmer.

    2.

    Use the figure above to answer the following questions.


    a) How can you determine that the figure represents a graph of a perfectly competitive
    firm? Be specific; indicate which curve gives you the information and how you use this
    information to arrive at your conclusion.
    b) What is the market price?
    c) What is the profit-maximizing output?
    d) What is total revenue at the profit-maximizing output?
    e) What is the total cost at the profit-maximizing output?
    f) What is the profit or loss at the profit-maximizing output?
    g) What is the firm's total fixed cost?
    h) What is the total variable cost?
    i) Identify the firm's short-run supply curve.
    j) Is the industry in a long-run equilibrium?
    GT00703 SEM 1 2016/2017

    k) If it is not in long-run equilibrium, what will happen in this industry to restore long-run
    equilibrium?
    l) In long-run equilibrium, what is the firm's profit maximizing quantity?

    3. Use Figure 14.5, which shows the situation facing


    Mikes Bikes, a producer of mountain bikes, to
    answer (a) and (b). The demand and costs of other
    mountain bike producers are similar to those of
    Mikes Bikes.

    a) What quantity does the firm produce and


    what is its price? Calculate the firms
    economic profit or economic loss.
    b) What will happen to the number of firms
    producing mountain bikes in the long run?

    4. Bianca bakes delicious cookies. Her total fixed cost is $40 a day, and her average variable
    cost is $1 a bag. Few people know about Biancas Cookies, and she is maximizing her profit
    by selling 10 bags a day for $5 a bag. Bianca thinks that if she spends $50 a day on advertising,
    she can increase her market share and sell 25 bags a day for $5 a bag.

    a) If Biancas advertising works as she expects, can she increase her economic
    profit by advertising?
    b) If Bianca advertises, will her average total cost increase or decrease at the
    quantity produced?
    c) If Bianca advertises, will she continue to sell her cookies for $5 a bag or will
    she change her price?

    5. Refer to figure above to answer the following questions.


    a) What quantity will this monopoly produce and what price will it charge?
    b) Suppose the monopoly is regulated. If the regulatory agency wants to achieve economic
    efficiency, what price should it require the monopoly to charge?
    c) To achieve economic efficiency, what quantity will the regulated monopoly produce?
    GT00703 SEM 1 2016/2017

    d) Will the regulated monopoly make a profit if it charges the price that will achieve
    economic efficiency?
    e) Suppose the government decides to regulate the monopoly by imposing a price ceiling
    of $35. What quantity will the monopoly produce and what price will the monopoly
    charge?
    f) With the price ceiling of $35, what profit will the monopoly earn?

    6. Sleek Sneakers Co. is one of many firms in the market for shoes.

    a) Assume that Sleek is currently earning short run economic profits. On a correctly
    labeled diagram, show Sleeks profit maximizing output and price, as well as the area
    representing profit.
    b) What happens to Sleeks price, output and profit in the long run? Explain this change
    and show it on a new diagram.
    c) Suppose over time consumers become more focused on stylistic differences among
    shoe brands. How would this change in attitudes affect each firms price elasticity of
    demand? In the long run, how will this change in demand affect Sleeks price, output
    and profits?

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