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Assume that a price-taking firm in the wheat industry has typical U-shaped SAC and AVC shortrun cost curves and an upward sloping SMC curve. Assume that the minimum SAC is $30 at 225 units of output, and assume that the minimum AVC is at $18 at 120 units of output. a. Draw a diagram including the short-run MC, SAC, and AVC curves for this firm. b. What is the shutdown price for this firm? Explain your answer. c. Assume the market price is $23. Will the firm produce positive or zero output? If the firm produces a positive level of output (q* > 0), illustrate the level of profits (or losses) in your graph. (Without the explicit cost functions, you cannot give a numerical profit value. I am looking for a graph of the profits (or losses).) d. Describe the short-run supply curve for this firm
Consider an industry in which all firms have identical technology given by a production function: q = min K α , L 1 − α 1/2 , where q is the level of output, α is some constant between 0 and 1, and K and L are two inputs. Describe the long-run equil..
A machine, purchased for $45,000, has a depreciable life of 4 years. It will have an expected salvage value of $5,000 at the end of the depreciable life. Using the straight-line method, what is the book value at the end of year 3?
This question relates to Growth Annuity. If John takes a job at the local grocery store, his starting wage will be $40,000 per year, and he will get a 3% raise, in real terms, each year until he retires at the age of 53. If Linus lives to be 100, wha..
What is the optimality condition for the maximization of the utility function U (x,y) = xy^3 and the prices (Px,Py) = (2,.0.5)? Using the utility function and optimality condition from the previous question, If M = 40 what are the utility-maximizing..
Suppose that a biotech firm makes diagnostic tests and has a fixed-proportions production function in which one unit of output (diagnostic test) is produced using one worker and two units of capital (machines). If the firm has an extra worker and no ..
A few large companies, and a few small companies. The competition still exists amongst these firms in terms of product/ service, etc. What one firm does will impact the others. Entry and exist into these industry is difficult. Why? Because economies ..
Discuss how successful airlines control the use of discount fares by imposing and enforcing appropriate conditions on these fares, and how they utilize state-of-the art revenue management systems. Provide an example(s).
Suppose a bottle of French wine costs 70 francs. If the exchange rate moves from 6 francs /dollar to 7 francs / dollar, how much does the price of the wine change measured in dollars?
Your publishing house is about ready to release John Grisham's newest novel just in time for Holiday giving.
The characteristics of market structure make quality competition more likely than price competition? Which type of competition is more desirable from your viewpoint? Discuss.
Suppose that U.S. debt is $100 trillion dollars at the beginning of the fiscal year. During the fiscal year, the government spending is $7 trillion and government transfers are $2 trillion and tax revenues equal $10 trillion. At the end of the fiscal..
In a closed agricultural economy, a new water source has been discovered that is expected to provide a steady supply of water for the crops and thereby increasing expected output in the future. What happens to the real interest rate and output? Descr..
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