UCLA Microeconomic Calculation Questions Research Paper Please do question 4, chapter 9 and question 8, chapter 10 from Hall and Lieberman 5th or 6th edition. 6. In a p
3. “A profit-maximizing competitive firm will produce
the quantity of output at which price exceeds cost per
unit by the greatest possible amount.” True or false?
Explain briefly. [Hint: See Figure 3(a).]
4. The following table gives quantity supplied and
quantity demanded at various prices in the perfectly
competitive meat-packing market:
7. A stu
(in millions of lbs.)
Price (per lb.)
Assume that each firm in the meat-packing industry
faces the following cost structure:
a. What is the profit-maximizing output level for the
typical firm? (Hint: Calculate MC for each change
in output, then find the equilibrium price, and
calculate MR for each change in output.)
b. Is this market in long-run equilibrium? Why or
why not? (Hint: Calculate ATC.)
c. What do you expect to happen to the
number of meat-packing firms over the long
5. Assume that the kitty litter industry is perfectly com-
petitive and is presently in long-run equilibrium:
a. Draw diagrams for both the market and a typical
firm, showing equilibrium price and quantity for
the market, and MC, ATC, AVC, MR, and the
demand curve for the firm.
b. Your friend has always had a passion to get into
the kitty litter business. If the market is in long-run
equilibrium, will it be profitable for him to jump in
headfirst (so to speak)? Why or why not?
c. Suppose people begin to prefer dogs as pets,
and cat ownership declines. Show on your
diagrams from part (a) what happens in the
industry and the firm in the long run, assuming
that this is a constant cost industry.
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Part IV: Product Markets
8. Answer the following:
a. Complete the following table and use it to find
this monopolist’s short-run profit-maximizing
level of output. How much profit will this
b. Redo the table to show what will happen to the
short-run profit-maximizing level of output if the
monopolist’s marginal costs rise by $1 at each
level of output. How much profit will the firm
c. Redo the original table to show what will happen
to the short-run profit-maximizing level of output
if the monopolist’s marginal cost at each level
of output is $0.40 less than before. How much
profit would the firm earn in this case?
Total Marginal Total Marginal
Output Price Revenue Revenue Cost Cost Profit
9. In the short run, a monopoly uses both fixed and
variable inputs to produce its output. Draw a dia-
gram illustrating a monopoly breaking even. Then
alter your graph to show why, if the price of using
a fixed input rises, there will be no change in the
monopoly’s short-run equilibrium price or quantity.
(Hint: Which curves shift if the price of a fixed input
10. Suppose that Patty’s Pool has the demand data given
in Table 2 in the chapter. Further, suppose that Patty
has just two types of costs: (1) rent of $25 per day
and (2) towel service costs equal to 50 cents per
swimmer. Over the short run, rent is a fixed cost
(Patty has a lease she can’t get out of), but towel
service is a variable cost (it varies with the number
of swimmers). Patty’s marginal cost is therefore con-
stant at 50 cents.
a. Under these cost conditions, what are Patty’s
short-run profit-maximizing output and price?
What is her profit or loss per day?
b. Now suppose that, in addition to the costs just
described, the town imposes a “swimming
excise tax” on Patty’s Pool equal to $2 per
swimmer. What are Patty’s new short-run
profit-maximizing output and price? What
is her new profit per day? (Hint: First decide
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