Debeers's Diamonds Essay
Economics 1101 -- Assignment 4
Problem 1.
a. (1 point) What is the total fixed cost for the DeBeers Diamonds?
The total fixed cost for the DeBeers Diamonds is zero.
b. (2 points) Complete the table above, providing total revenue, marginal revenue and marginal cost, as well as Total Cost when Q = 0. (Remember to put marginal items in between units.)
COSTS REVENUES
Quantity
Produced Total Cost
($) Marginal
Cost Quantity
Demanded Price
($/unit) Total
Revenue Marginal
Revenue
0 0 0 14,000 0 6,000 13,000 1 6,000 1 13,000 13,000 6,000 11,000 2 12,000 2 12,000 24,000 6,000 9,000 3 18,000 3 11,000 33,000 6,000 7,000 4 24,000 4 10,000 40,000 6,000 5,000 5 30,000 5 9,000 45,000 6,000 3,000 6 36,000 …show more content…
e. (1 point) Assuming the DeBeers Diamonds can operate as in d) above, what will be the total profit at the profit-maximizing quantity? Briefly explain what would have to be true in order for profit to persist in the long-run for the DeBeers diamonds?
Total profit= total revenue- total cost
Total profit= (4*10 000) – 24,000
Total profit= $16,000
The total profit at the profit-maximizing quantity will be $16, 000. In order for profit to persist in the long run it would have to be true that no new companies entire the market.
f. (2 points) Assuming the DeBeers Diamonds is able to operate as a monopolist in this market and does not price discriminate, what is the value of consumer and producer surplus at the point of profit maximization? Use the table. Show your calculations.
Consumer surplus= (13, 000- 10, 000) + (12, 000- 10, 000) + (11, 000- 10, 000)+ (10, 000 – 10, 000) = 3, 000 + 2, 000 + 1, 000 = $6, 000
Therefore, the value of consumer surplus at the point of profit maximization is $6, 000.
Producer surplus= ($14, 000 – $10,000) x (4-
Problem 1.
a. (1 point) What is the total fixed cost for the DeBeers Diamonds?
The total fixed cost for the DeBeers Diamonds is zero.
b. (2 points) Complete the table above, providing total revenue, marginal revenue and marginal cost, as well as Total Cost when Q = 0. (Remember to put marginal items in between units.)
COSTS REVENUES
Quantity
Produced Total Cost
($) Marginal
Cost Quantity
Demanded Price
($/unit) Total
Revenue Marginal
Revenue
0 0 0 14,000 0 6,000 13,000 1 6,000 1 13,000 13,000 6,000 11,000 2 12,000 2 12,000 24,000 6,000 9,000 3 18,000 3 11,000 33,000 6,000 7,000 4 24,000 4 10,000 40,000 6,000 5,000 5 30,000 5 9,000 45,000 6,000 3,000 6 36,000 …show more content…
e. (1 point) Assuming the DeBeers Diamonds can operate as in d) above, what will be the total profit at the profit-maximizing quantity? Briefly explain what would have to be true in order for profit to persist in the long-run for the DeBeers diamonds?
Total profit= total revenue- total cost
Total profit= (4*10 000) – 24,000
Total profit= $16,000
The total profit at the profit-maximizing quantity will be $16, 000. In order for profit to persist in the long run it would have to be true that no new companies entire the market.
f. (2 points) Assuming the DeBeers Diamonds is able to operate as a monopolist in this market and does not price discriminate, what is the value of consumer and producer surplus at the point of profit maximization? Use the table. Show your calculations.
Consumer surplus= (13, 000- 10, 000) + (12, 000- 10, 000) + (11, 000- 10, 000)+ (10, 000 – 10, 000) = 3, 000 + 2, 000 + 1, 000 = $6, 000
Therefore, the value of consumer surplus at the point of profit maximization is $6, 000.
Producer surplus= ($14, 000 – $10,000) x (4-