Market Competition: Microeconomics
Market Competition
Robert McGill
BA 201 Microeconomics
4 April 2011
Market Competition
1. Fill in the table below. Assume TC stands for Total Cost, TFC as Total Fixed Cost, TVC as Total Variable Cost, ATC as Average Total Cost, AFC as Average Fixed Cost, AVC as Average Variable Cost, and MC as Marginal Cost. TC
TFC
TVC
ATC
AFC
AVC
MC
Units of Output
0
20
20
0
0
0
0
0
1
21
20
1
21
20
1
1
2
24
20
4
12
10
2
3
3 32
20
12
10.67
6.67
4
8
4
48 20
28
12
5
7 16
5
75 20
55
12
1
11 27
6
116 20 96 19.33
3.33
16 41
7
148 20
128
24
2.86
21.14 32
8
234 20 214 26.75 2.5 24.25
86
9
380
20
360
42.22 2.22
40
146 2. Using the graph below, answer the following questions:
The market demand at the beginning is D1, and its corresponding marginal revenue is MR1. The initial ATC is ATC1, and the original supply is MC1. Therefore,the monopolist sells 15 units at $20 per unit, and his/her total profit is $5. After a given time period, due to investment and technological advances, which cost the monopolist an increase in TFC, results in a cost of production decrease to ATC2 and its corresponding supply to MC2. The monopolist, then, in the absence of price regulation by the government, would like to produce 15 units and charge a unit price of $25. However, due to quality improvements and effective advertising, the demand increases to D2, while its corresponding marginal revenue is MR2, with ATC2 and MC2 remaining unchanged. The monopolist, therefore, produces and sells approximately 15 units at $55 per unit. His/her total profit is now approximately $50.
Robert McGill
BA 201 Microeconomics
4 April 2011
Market Competition
1. Fill in the table below. Assume TC stands for Total Cost, TFC as Total Fixed Cost, TVC as Total Variable Cost, ATC as Average Total Cost, AFC as Average Fixed Cost, AVC as Average Variable Cost, and MC as Marginal Cost. TC
TFC
TVC
ATC
AFC
AVC
MC
Units of Output
0
20
20
0
0
0
0
0
1
21
20
1
21
20
1
1
2
24
20
4
12
10
2
3
3 32
20
12
10.67
6.67
4
8
4
48 20
28
12
5
7 16
5
75 20
55
12
1
11 27
6
116 20 96 19.33
3.33
16 41
7
148 20
128
24
2.86
21.14 32
8
234 20 214 26.75 2.5 24.25
86
9
380
20
360
42.22 2.22
40
146 2. Using the graph below, answer the following questions:
The market demand at the beginning is D1, and its corresponding marginal revenue is MR1. The initial ATC is ATC1, and the original supply is MC1. Therefore,the monopolist sells 15 units at $20 per unit, and his/her total profit is $5. After a given time period, due to investment and technological advances, which cost the monopolist an increase in TFC, results in a cost of production decrease to ATC2 and its corresponding supply to MC2. The monopolist, then, in the absence of price regulation by the government, would like to produce 15 units and charge a unit price of $25. However, due to quality improvements and effective advertising, the demand increases to D2, while its corresponding marginal revenue is MR2, with ATC2 and MC2 remaining unchanged. The monopolist, therefore, produces and sells approximately 15 units at $55 per unit. His/her total profit is now approximately $50.