Essay on Study Guide for Economics

The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the

15. In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is ( )

d. Calculate the price elasticity of demand in each market and discuss these in relation to the prices to be charged in each market.

In this paper I am going to explain some of the key terms that companies need to keep in mind when operating their business. First, we will start with marginal revenue, which is defined simply as the extra revenue that is made for each additional unit of a product that is sold. This is directly related to marginal cost, which is what it costs the company to make that additional unit of product.

Explain how a profit maximizing firm determines its optimal level of output, using marginal revenue and marginal cost as criteria:

Two-part pricing: A local surf store estimates that their average customer 's demand per year is P = 3.5 - 0.5Q, and knows that the marginal cost of each rental is $0.5. a- How much should the store charge for an annual membership in order to extract all the consumer surplus using an optimal two-part pricing strategy? b- How much should the store charge for each rental if it uses an optimal two-part pricing strategy?

C. Any gain or loss in the firm's revenue from increasing its price would depend on the price elasticity of demand: The more elastic the demand, the higher the revenue potential from a price increase.

As against his a competitive firm cannot change different prices from different buyers since he faces a perfectly elastic demand at the going market price. If he increases a slights rise in price he will lose the sellers and makes loss. Thus a competitive firm cannot discriminate prices which a monopolist can do.

In comparison, the marginal cost is the added cost of producing one more unit of output. It is determined by the change in total cost (TC) divided by the change in output (Q). MC= TC/Q. In the provided scenario, for Company A to produce one widget TC=$30, to produce two widgets TC=$50 thus the marginal cost was $20; furthermore the cost per widget to produce was $25. Marginal cost will continue to decrease for Company A until they reach their profit maximization of $42.86 per widget at 7 widgets. Marginal cost will then begin to decrease for every additional widget produced until the end result of 15 widgets with a MC that exceeds $80, also allowing TC to topple to TR ($1220/15=$81.33).

The monopolistic rivalry business structure incorporates numerous organizations offering somewhat separated items. There is a simple passage into the business sector by new firms over the long haul, and the organizations are sufficiently extensive to impact the aggregate supply. There are likewise various measurements of rivalry, including dissemination outlets, promoting, and item characteristics. The peripheral expense will be not exactly the cost at its benefit amplifying yield level. As indicated by the content, a monopolistic contender can't make long-run benefit (Colander, 2013).

Is there a way to estimate the cost of services and product to customers such that Stuart’s Branded Foods can be competitive in their market? Use the illustrations of the two customers to demonstrate your approach. What would be the selling price per kit or per cup for each customer?

8. Compared to a perfectly competitive industry with the same demand and cost curves, a monopoly’s price and output will be which of the following?

v. What are the limitations, if any, to the estimates of the profitability of the two customers? (Hint: Consider what improvements could be made to the accounting system to obtain more accurate costs)

B) no government regulations exist. C) demand curves are perfectly horizontal. D) suppliers will supply any amount that buyers wish to buy. Answer: A 19) Once an equilibrium is achieved, it can persist indefinitely because A) shocks that shift the demand curve or the supply curve cannot occur. B) shocks to the demand curve are always exactly offset by shocks to the supply curve. C) the government never intervenes in markets at equilibrium. D) in the absence of supply/demand shocks no one applies pressure to change the price. Answer: D 20) If price is initially above the equilibrium level, A) the supply curve will shift rightward. B) the supply curve will shift leftward. C) excess supply exists. D) all firms can sell as much as they want. Answer: C 21) An equilibrium in a market is described by A) a price only. B) a quantity only. C) the excess supply minus the excess demand. D) a price and a quantity. Answer: D 3

a) Draw Brennan's average total, marginal revenue and marginal cost curves. (Hints: calculate total revenue (P* times Q) first, and then calculate MR)