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

Microeconomics - Math Problem Example

Comments (0) 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 paperFile format: .doc, available for editing
GRAB THE BEST PAPER98.8% of users find it useful
Microeconomics Math Problem
Read TextPreview

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
95
40
55
95
$55
2
75
115
20
37.5
57.5
20
3
90
130
13.33
30
43.33
15
4
110
150
10
27.5
37.5
20
5
135
175
8
27
35
25
6
170
210
6.67
28.33
35
35
7
220
260
5.71
31.42
37.13
50
8
290
330
5
36.25
41.25
70
a) 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 = $104
b) 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 price
Quantity supplied
Profit (+) or loss (-)
$72
8
246
52
7
84
45
7
34
28
5
(35)
22
0
(40)
15
0
(40)
Price Industry Quantity Supplied
72 8*500 = 4000
52 3500
45 3500
28 2500
22 0
15 0
e) Equilibrium Price = $52
f) 7 Units
g) 104/7 = $14.85
h) (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 = $24
b) Price = $51 Quantity = 6 Units, Profit = 306 - 351 = ($45)
c) Price = $60, Quantity = 5 Units, Profit = 300 - 300 = 0
d) 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
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Microeconomics Math Problem

Economic Assignment (Keynesian Economics)

3 Pages(750 words)Assignment

Training Activity

4 Pages(1000 words)Coursework

Economic Crisis of 2008 and Natural Resources

5 Pages(1250 words)Essay

Human Resources Management Pay for Performance at Dee's Personalized Baskets

3 Pages(750 words)Case Study

Project Evaluation

...?Running Head: PROJECT EVALUATION Project Evaluation School Contents INTRODUCTION 3 ANALYSING THE FEASIBILITY OF THE PROJECT 3 JUSTIFICATION ABOUT THE METHOD USED TO EVALUATE THE PROJECT 4 OTHER FACTORS THE COMPANY MIGHT CONSIDER 6 CONCLUSION 7 Reference List 9 Appendix 10 INTRODUCTION This report analyses one of the projects that Salsbury is analyzing to invest. Salsbury is a nationwide chain of supermarkets and it is evaluating whether it should start a new retail store on the outskirts of Dingwall or not and for this purpose, the report discusses the feasibility of the retail store. The management uses one of the most widely used project evaluation techniques, Net Present Value (NPV) to evaluate the feasibility of the project... Head:...
5 Pages(1250 words)Math Problem

A Reaction to the Article Are Poor People Responsible for Their Own Poverty

3 Pages(750 words)Essay

Review of Accounting Ethics

5 Pages(1250 words)Research Paper

Relationship between Money Supply and Inflation in Saudi Arabia

... how microeconomics have an effect on money supply, financial plan deficits and the way these activities can influence the line of monetary development. Relevant econometrics will be employed in this document to show the correlation involving money supply and inflation. Hence it’s probable that borrowing from the domestic market to supplement the government budget could reduce financial resources for the private sector and hence investments are greatly discouraged. Money Supply: The Definition Generally, money supply can be defined as the overall or the sum of the cash amount that is in circulation or is available in a particular country. Money supply on the other hand can be equated to the monetary base (i.e. the total worth). In order...
11 Pages(2750 words)Math Problem

Computer Numerical Control

3 Pages(750 words)Essay

The effectiveness of anti-social behavioural orders

12 Pages(3000 words)Essay

7 Separate annotated bibligraphy

6 Pages(1500 words)Essay

The case of cadmium poisoning in japan

10 Pages(2500 words)Research Paper

Downstream Processing of Recombinant Proteins in E.coli

4 Pages(1000 words)Essay

Personal Statement for entry to faculty of law

2 Pages(500 words)Personal Statement

Nursing Retention in the Hospital setting

6 Pages(1500 words)Term Paper

Planning Health Promotion & Disease Prevention Programs

1 Pages(250 words)Assignment

A College Football Playoff System

5 Pages(1250 words)Research Paper

Legalization of Euthanasia - Pros and Cons

6 Pages(1500 words)Research Paper
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.

Let us find you another Math Problem on topic Microeconomics Math Problem for FREE!

Contact Us