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Your consulting firm was just granted an exclusive contract for your state. You now must decide your pricing policy, given the following relationships: P = $1400 – 0.0004Q MR = $1400 – 0.0008Q AVC = $1000 where P is the price, Q the quantity, and AVC the average variable cost. The firm will encounter no fixed costs, and all revenue is after taxes. As your firm has been granted an exclusive contract, your pricing and output decisions will be those of a monopolist. Tasks: 1. Using the data above, calculate the output the firm will provide. 2. Determine the price at this output level. 3. Complete the Microsoft Excel Template given below using the data in the problem. 4.Check whether your data is consistent with your calculations in question 1. Why or why not? 5.Now assume that the state decides to give as many contracts as it can for the same activity, so your firm is now operating in a perfectly competitive market. How will your price and output decisions change? Explain the differences and why these changes happened.
Other channels of monetary policy. Consider this quote:” Monetary policy does not work simply through lowering interest rates. Sometimes it can directly affect particular credit markets in the economy.” Can you give an example of actions that the Fed..
In the long run, some firms will respond by, The new equilibrium price and quanity suggest that the shape of the long-run supply curve in this industry is (horizontal, vertical, upward sloping, downward sloping)
Illustrate what are the five specific events that can be expected to cause the equilibrium price of ice cream to increase.
Compute the price elasticity of demand for subway rides. If the transit authority reduces the fare back to 50 cents, what impact would you expect on the ridership? Why?
Suppose that the natural rate of unemployment in a particular year is 4 percent and the actual rate of unemployment is 11 percent. Use Okun’s law to determine the size of the GDP gap in percentage-point terms. If the potential GDP is $500 billion in ..
According to tournament theory: Pay gaps between job positions get larger at successively higher levels in the organizational hierarchy. High executive pay is due to moral hazard. People seeking the CEO’s job compete to acquire the right signal about..
Explain why sharp decline in oil prices might not necessarily have positive or negative impact.
It is said that there is no completition in a perfect competition situation. Why? Give an example to illustrate this. Name 3 commodities that you would consider to be bought and sold in a perfect competition market situation. If someone is producing ..
Production When you have completed your study of this chapter, you will be able to 1 2 3 4 Explain how economists measure a firms cost of production and profit. Explain relationship between a firm output and labour employed in short run.
What does the term "INTEREST RATE INVERSION" refer to? For the past several years, the Federal Reserve System has forced short-term interest rates to nearly zero. Why has it not been able to do the same for long-term interest rates? Explain
How might you construct a measure of the change in the price level. Illustrate what additional information might you need to construct your measure.
Using the numbers that you calculated above, explain the relationship between the marginal cost and average variable cost.
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