ECON201-Profit Maximization and Competitive Supply – Economics Assignment Help

Assignment Task

Task 

Assessment 2 questions:
Question 1 A firm in a competitive industry has a total cost function of:
  TC = 0.3Q2 – 6Q + 60
 Its corresponding marginal cost curve is:
  MC = 0.6Q – 6
 
a. If the firm faces a price of $12, what quantity should it produce to maximise profit?
b. What profit does the firm make at this price?
c. Should the firm shut down? Explain why or why not.
d. At what minimum price should the firm produce positive output?
e. At what price is the firm in the long run equilibrium?
f. Present a graphical representation of this case study and discuss about the profit maximising output under the different scenarios presented above. Would you introduce any policy intervention in this case? Under which circumstances?

Question 2, The world price of mangoes is US$4 per unit, and almost all of them are produced outside Argentina. Suppose the Argentinian demand curve is: 
QD = 400,000 – 40,000P 
Where P is price in US$ per unit, and Q is measured in units. There is an area in the Northern Province of Jujuy that produces some mangoes domestically, so the Argentinian domestic supply curve is QS = 10,000P.

a. What is the equilibrium price and quantity under autarky?

b. Imagine the Argentinian government decided to allow international trade. Before a tariff is imposed, what are the equilibrium price and domestic consumption in that scenario?

c. Before a tariff is imposed, what are the domestic production and imports?

d. The Argentinian government has decided to help the local mango industry by imposing a tariff of US$1 per unit. What are the new equilibrium price and domestic consumption?

e. What are the new domestic production and imports after the tariff is imposed? How much money the government collects for the tariff?

f. Present a figure of this case study and discuss about the effects of opening to international trade of mango and the effects of the tariffs, presenting the losses to Argentinian consumers, gains to Argentinian farmers and potential deadweight loss. Which other policy intervention alternatives might the Argentinian government have to help domestic producers?
 

3) Question 3,  A firm faces the following average revenue (demand) curve: 
P = 20,000 – Q
Where Q is monthly production and P is price, measured in cents per unit. The firm’s cost function is given by TC = 1,000Q + 500,000. Assume that the firm maximises profits and is the only company selling in the market.
 
a. What is the level of production, price, and total profit per month?
b. If the government decides to levy a tax of 1,000 cents per unit on this product, what will be the new level of production, price, and profit?
c. How does this result change if the government does not apply the tax and the company decides to aim for the competitive outcome, given the potential entry of competitors in the industry?
d. Present a graphical representation of this case study and discuss about the profit maximising output under the different scenarios presented above. Would you introduce other policy interventions in this case? Under which circumstances?
 
 

4) Question 4.  A monopolist sells boat insurance policies linked to their registrations in two states, and resales between the two states is not allowed, as the registrations are in line with the rules set in each state. The demand curves for boat insurance policies in the two states are:
P1 = 200 – Q1
P2 = 150 – Q2
The monopoly’s marginal cost is $50.
 
a. Find the equilibrium quantity and price charged in each state.
b. How would the outcome change if the monopolist’s marginal cost increases from $50 to $70 only in the first state and the company is able to discriminate prices between states?
c. What would be the outcome if the government applies a tax of $30 per insurance (unit) to the latest scenario presented in b)?
d. Present a graphical representation of this case study and discuss about the profit maximising output under the different scenarios presented above. Does the government have other alternatives to intervene this market?

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