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Material Type: Quiz; Professor: North; Class: Intermediate Microeconomic Analysis; Subject: Economics; University: Baylor University; Term: Spring 2001;
Typology: Quizzes
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ECO 3306 Name:
Spring 2001
Dr. Charles M. North
QUIZ #4 (Chapters 23-25)
D ( p )= 600 , 000 − 20 , 000 p , where p is the market price. There are 1,000 firms producing hammers in this market, each with technology represented by the short run cost function
2 c (^) s y = y + , where y is the number of hammers produced by the firm. Thus, each firm’s
supply function is y ( p )= 40 p.
a. (1 point) What is the industry supply function?
S ( p )= 1000 y ( p )= 40 , 000 p
b. (2 points) What is the equilibrium market price and quantity? D ( p )= S ( p ) ⇒ 600 , 000 − 20 , 000 p = 40 , 000 p ⇒ p *= 10 ⇒ q *= 400 , 000 c. (2 points) How many hammers does each firm produce, and how much profit is each firm earning?
p y c y
y p
π
d. (1 point) Suppose that market demand increases to D ( p )= 800 , 000 − 20 , 000 p. What is the
new equilibrium price and market quantity?
q
D p S p p p p
e. (2 points) Under this new level of demand, how much will each firm produce? What will each firm’s profit be?
2
− =^ ≈
py c y
y p
π
f. (2 points) Draw graphs of the market and a typical firm that summarizes your findings in (a)- (e).
Q (000)
p $
y
10
400 533
MC
400 533
AC
$1,555.
groups of consumers in The Hungry Heifer’s vicinity: the carnivores and the mostly carnivores.
Weekly inverse demand for the carnivores is represented by the function Pc Qc 100
= 30 − , and
weekly inverse demand for the mostly carnivores is represented by the function Pmc Qmc 200
The Hungry Heifer has a constant marginal cost of $5 per steak dinner; there are no fixed costs.
a. (5 points) If The Hungry Heifer can tell the customers apart, what price will it charge to each group? How many steak dinners will each group buy each week? What is The Hungry Heifer’s profit from each group?
Carnivores: 2 100
1
c
c c
c c
c c c c
π
π
π
MostlyCarnivores: 2 200
1
c
mc mc
mc mc
mc mc mc mc
π
π
π
b. (2 points) If The Hungry Heifer cannot tell the customers apart, what is the inverse demand function for both groups combined?
mc mc mc mc
c c c c
c. (3 points) If The Hungry Heifer cannot tell the customers apart, what price will it charge for all steak dinners? How many steak dinners will be sold? What is The Hungry Heifer’s profit?
π
π
π
dQ
d