MBAA 523 Problems Set 5 Answers (ERAU)
1. For each of the following market structure characteristics, insert the correct Market Type(s). There may be more than one. Use these abbreviations: PC – perfect competition; MC – monopolistic competition; and M – monopoly.
2. Assume a perfectly competitive market structure. Complete the diagram to show the profit maximizing price and quantity. Label each (use Insert textbox). Is the firm earning economic profits or losses? If so, what will occur over the long-term?
3. A firm sells its product in a perfectly competitive market where other firms charge a price of $80 per unit. The firm’s costs are C(Q) = 40 + 8Q + 2Q2. Show your computations.
4. Complete the diagram showing the profit maximizing price and quantity. Label each. Show and label the deadweight loss (In MS Word, use Insert/Curved Connector, a curved line).
5. A firm is a monopoly with demand and cost functions given by P = 200 – 2Q and C(Q) = 2,000 + 3Q2 respectively. Show your computations.