Calculate economic profit, Financial Accounting

Calculate Economic profit:

Suppose a monopolistically competitive firm is facing the following demand and cost information.

2240_Economic profit earned.png

a.  If the firm is a profit maximizer, how many units of output should the firm produce?  How did you find this number?  Explain.

b.  What price should the firm charge?  Why? Explain.

c.  What is the amount of economic profit (or economic loss) earned (or incurred) by the firm?

d.  What do you predict will happen in the long-run?  Why? 
 
2.  Your friend Mike owns a coffee shop in a town with many competing coffee shops in a monopolistically competitive industry.  One day Mike tells you (a trained economist) that he is earning an economic profit and is currently setting his price equal to his marginal cost.  Is Mike producing the profit-maximizing amount of coffee?   If not, what should he do?  Explain.  What will be effect of that proposed course of action?
 
3.  Your friend Alberta is the owner of a boutique clothing store in a monopolistically competitive clothing market, so Alberta's store has some degree of market power. Assume further that the market is in long-run equilibrium. Over coffee, Alberta tells you that she is considering raising the price of her clothing to increase her profits. What is your advice?

Posted Date: 2/14/2013 1:43:21 AM | Location : United States







Related Discussions:- Calculate economic profit, Assignment Help, Ask Question on Calculate economic profit, Get Answer, Expert's Help, Calculate economic profit Discussions

Write discussion on Calculate economic profit
Your posts are moderated
Related Questions
For getting the EOQ formula we shall use the subsequent symbols: U = annual usage/demand Q = quantity ordered F = cost per order C = per cent carrying cost P  = pric

Q. Explain the Negative Assurance? Negative Assurance - Report issued by an ACCOUNTANT based on limited procedures which states that nothing has come to accountant's attention

Determine out the future value of Rs.1000 compounded yearly for 10 years at an interest rate of 10 percent. Solution: The future value 10 years thus would be FV = PV (1+k)

The economic demand quantity can also be found out with the assist of a graph. In this technique ordering cost, carrying cost and total inventory costs as per various lot sizes are

what managers should know about internal rate of return (IRR) and why?

abc limied is considering whether to invest $90000 in the purchase of a new item of equipment. The equipment would be paid for with a down-payment of $60000 and the payment of the

Q. What is fair value in stock market? Fair value - Amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between

Read Appendix B, "Sample Brief Memorandum," that starts on page 193 of the textbook. In 2-3 pages (12 point font, double spaced), critique the memorandum based on what we've learne

Show all support work for your calculations. 1.  Simple Interest versus Compound Interest [LO1]  First City Bank pays 7 percent simple interest on its savings account balances,

Lockheed Martin's management wishes to find out whether they have excess debt capacity. Its current market value of equity is $40 b and its book value of debt is $