StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Microeconomics - Math Problem Example

Cite this document
Summary
Looking at the data, one might say that it is not feasible for the company to be flying between the two cities as it implies a loss of $2000 (Total Revenue - Total Cost). However, rationality of the situation according to the economic analysis is that the firm should continue to operate and should fly between the two cities in the short-run…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.9% of users find it useful
Microeconomics Math Problem
Read Text Preview

Extract of sample "Microeconomics"

1) Total Revenue = 200 * 40 = $8000 Total Costs = 2 2 4 = $10,000 Fixed Costs = 2+2 = $4000 Total Variable Costs = 4 1 = $6000 Overall Loss = 8000-10000 = ($2000)Looking at the data, one might say that it is not feasible for the company to be flying between the two cities as it implies a loss of $2000 (Total Revenue - Total Cost). However, rationality of the situation according to the economic analysis is that the firm should continue to operate and should fly between the two cities in the short-run.

The rational behind this decision is the fact that in this case firm is covering all its variable costs and generating revenue which is greater than total variable costs. This means that firm is contributing the amount over and above the variable costs to the fixed costs. For example, if the company decides not to fly, it will still incur the fixed costs as they are not related to the output. It will only save the variable costs. In this situation there's no revenue as firm's planes are lying idle.

In this situation the firm will still have to pay its insurance and incur depreciation incurring a loss of $4000. However, if it flies between the two cities it makes a loss of only $2000. Hence, it is better for the company to fly between the two cities. However, if it keeps on making losses and they extend to the long-run, then it is better for the firm to shut-off its operations and invest its capital in an industry, where it could make a normal profit.2)(1) Total product (2) Total var. cost (3) Total cost (4) AFC (5) AVC (6) ATC (7) MC 0 $ 0 $ 40 $__-___ $__-___ $__-___ -1 55 95405595$552 75 1152037.557.5203 90 13013.333043.33154 110 1501027.537.5205 135 17582735256 170 2106.6728.3335357 220 2605.7131.4237.

13508 290 330536.2541.2570a) At price of $52, the firm will produce 7 Units because at this stage it's P = MR. its profit in this case will be 52*7 = 364 - 260 = $104b) At the product price of $28, the production will fall to 5 units. At his point the firm will be making a loss of = 140 - 175 = ($35). Despite the loss, the firm will continue to produce as it covering its variable costs. c) At the product price of $22, there will be no production at all. Looking at the data, the firm will try to equate its price with MR and the resulting output according to this should be 2 units.

However, the revenue gained from this will be only $44, whereas the average costs will be $75, as a result the firm will not produce at all as its revenue is less than average costs and it will only increase the loss if the firm decides to go with the production.d)Product priceQuantity suppliedProfit (+) or loss (-)$72 8246 52 7 8445 73428 5 (35)22 0 (40)15 0(40) Price Industry Quantity Supplied 72 8*500 = 400052 350045 350028 250022 015 0e) Equilibrium Price = $52f) 7 Unitsg) 104/7 = $14.85h) (14.85 * 3500)/ 500 = $103.95 3)Since monopoly equates his MR = MC, to determine the level of production and since MR of monopolist is always above average revenue curve, the output produced by monopolist is always less than perfectly competitive industry and price charge is higher.

As a result of high pricing, part of consumer surplus is converted into producer surplus. As a result of this consumer surplus is lesser and producer surplus is greater in monopoly firm, as compared to a perfectly competitive firm.a) Price = $69, Quantity = 4 Units , Profit = 276 - 252 = $24b) Price = $51 Quantity = 6 Units, Profit = 306 - 351 = ($45)c) Price = $60, Quantity = 5 Units, Profit = 300 - 300 = 0d) The best situation is when the monopoly is charging a fair return price because in this quantity is greater than unregulated monopoly which means that consumers will be better-off.

Similarly, this situation allows monopolist to earn a normal profit unlike when monopolist charges a price equal to MC. If monopolist makes a loss, he will leave the industry and in order to retain him in the industry, it is necessary to allow him to make at least some profit or normal profit. All these conditions are fulfilled in the fair-return monopoly and hence it will lead to the efficient working in the industry.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Microeconomics Math Problem Example | Topics and Well Written Essays - 500 words”, n.d.)
Retrieved from https://studentshare.org/miscellaneous/1499227-microeconomics-math-problem
(Microeconomics Math Problem Example | Topics and Well Written Essays - 500 Words)
https://studentshare.org/miscellaneous/1499227-microeconomics-math-problem.
“Microeconomics Math Problem Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/miscellaneous/1499227-microeconomics-math-problem.
  • Cited: 0 times

CHECK THESE SAMPLES OF Microeconomics Math Problem

The Importance of Revenue Forecasting

Revenue Name University Instructor Date Introduction The importance of forecasting cannot be adequately emphasized.... The information obtained from the hotel association outlook for the future as well as other industry information is very useful in determining the revenues that can be achieved based on the economic situation in the industry and in the environment generally....
3 Pages (750 words) Math Problem

Automation Tools Math Problem

VBA code might be created within Excel by recording a macro.... Even so it often proves necessary to resort to hand coding.... Provide three examples where hand coding rather than recording a macro is required to accomplish a particular task.... You might wish to consider for example the use of variables or how 'selection' and 'iteration' are accomplished....
11 Pages (2750 words) Math Problem

My Personal Finance Concepts

… Review your tax return for last year and answer the following questions: Let's assume that the tax rate in my is 9% and my incomeis roughly $50,000 a year.... ould any income have been deferred to this year If so, how much tax could have been saved Multiply the amount deferred by 15% or 28%, depending on your tax bracket....
1 Pages (250 words) Math Problem

Solving Math Problem

… As zero remainder is received for the synthetic division by -4, x = -4 is zero and (x+4) is the factor of the given polynomial.... However, the subsequent division by 2 produced the non-zero remainder.... x=2 is not a zero.... ... ) For f(x) = 2x 3 -5x2-4x+3 from the Rational roots test we can suggest that +/-3 (multiple of the factor 3/2) can be the possible solutions....
2 Pages (500 words) Math Problem

High School Math Tasks

2.... The population of the country is 50 million.... Two months ago, the government required its citizen to purchase an identity card.... After one month, 6 million people had it and by the end of the second month, 10 million people had one. ... ... rom the results, the model and even the graph indicate a negative value....
7 Pages (1750 words) Math Problem

College Math: Elimination Method for Solving a System of Equations

Although the vectors QR and RQ refer to the same segment between the points R and Q, they are two distinct vectors and can not be considered equivalent.... It happens because a vector is characterized by both numerical value and vector's direction.... Vectors QR and RQ have exactly the same length but opposite direction and, therefore, differ from each other. ...
2 Pages (500 words) Math Problem

Solution of Math Problems

The paper contains math problems and their solution.... The problems concern the economic issues in farming.... The author states that the optimal solution is to provide the farmer with $1200.... Bargaining is not possible since the farmer is subjected to damage, which is not related to the railroad....
2 Pages (500 words) Math Problem

Integration Analysis

As shown in the diagram above, producer surplus is the area above the supply function but below the equilibrium price, while consumer surplus is the area above optimum price but below the demand curve. ... ... onsumer surplus is refers to the excess accruing to the customers when the… For instance, in the above case the market price is £15, for every single unit (1000 units), consumed....
3 Pages (750 words) Math Problem
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us