Economics for Business Decision Making (BUSS1040)

Consider a competitive, constant-cost industry. Firms operating in this market face an identical cost of production. The total cost is given by TC = 180 + 41q + 5q2. What is the price in the long-run market equilibrium?

Assume that a firm has TC = 100 + q^2. If price is $20, which statement is true? Group of answer choices he firm produces 20 units, and makes an economic profit; this outcome is not a long-run equilibrium. The firm produces 25 units, and makes an economic profit; this outcome is not a long-run equilibrium. The firm produces 10 units, and makes zero economic profit; this outcome is a long-run equilibrium. The firm produces 20 units, and make zero economic profit; the market is in its long-run equilibrium.

Suzanne is the monopoly seller of an illegal product in a particular city. Her marginal cost is $12 per unit and she has no other costs. She faces a demand curve of P = 181–q, and she charges the same price to all her clients. Unfortunately for Suzanne, in the city there is a corrupt government official who has the power to shut Suzanne’s operation down. This official, however, is willing to take a bribe and let Suzanne continue to sell. What is the highest bribe that Suzanne is willing to pay? [Hint: she wants to be at least as well off as having to stop operating]

The short-run marginal and average variable cost curves for a competitive firm are given by MC = 2+2q and AVC = 2+q. The profit-maximizing level of output for a firm is 4 and its total fixed cost is $18. Which of the following must be true about the firm? Group of answer choices The firm is charging a price of $4 and covering its average variable cost, hence it should continue operating in the short-run. The firm is charging $10 and will remain in the industry in the short-run; but it is not covering its total costs and will consider leaving the industry in the long run. The firm is charging a price of $4 and making a short-run loss, hence it should shut down immediately. The firm is charging a price of $10 and making a zero profit, hence it should shut down eventually. The firm is charging a price of $10 and making a positive profit, hence it will remain in the industry in the long-run.

Ken runs a barber shop. Given the popularity and location of the restaurant, he has a monopoly position in the market. The market demand curve is given by Q = 120 – 2P. Ken has a total cost of TC = Q2. If he charges the same price to all customers, what are Ken’s profit-maximising price PM and quantity QM? Group of answer choices PM = $50; qM = 20 units. PM = $40; qM = 40 units. PM = $40; qM = 100 units. PM = $100; qM = 40 units. None of the above. Ken is better off closing the shop.

Laura runs a nightclub, ‘Two Standard Drinks’. Given the popularity and cache of the club, she has a monopoly position in the market. The market demand curve is given by P = 141–q. Laura has a marginal cost per drink of MC = 2q and a fixed cost FC = $180. If Laura charges the same price to all customers, what is the resulting DWL? [Round your final answer to 2 decimal points when necessary]