1 A manufacturer of electronics products is considering entering the telephone equipment business. It estimates that if

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1 A Manufacturer Of Electronics Products Is Considering Entering The Telephone Equipment Business It Estimates That If 1 (287.19 KiB) Viewed 45 times

1 A manufacturer of electronics products is considering entering the telephone equipment business. It estimates that if it were to begin production, its short run cost function would be as follows: (1000) 9 10 11 12 13 14 15 16 17 18 19 20 AVC 4110 40.00 3910 38.40 37.90 37.60 37.50 37.60 37.90 38.40 39.10 40.00 AC 52.21 50.00 48.19 46.73 45.59 44.74 4417 43.85 43.78 43.96 44.36 45.00 MC 30/70 30.10 30.10 30.70 31.90 33.70 36.10 39.10 42.70 46.90 51.70 57.10 b Suppose the average wholesale price of a wireless phone is currently $40. Do you think this company should enter the market? Explain. (1 Mark) What is the amount of profit (or loss) earned by the firm at the optimal level of production? (1 mark) What is the lowest price firm would accept before it should shutdown (1 Mark Now suppose the average wholesale price of a wireless phone decreased to $30. Do you think this company should produce or shutdown in the short run 2 Explain. (1 Mark). c d. 2 A firm has two plants, one in the United States and one in Mexico, and it cannot change the size of the plants or the amount of capital equipment. The wage in Mexico is $5. The wage in the U.S. is $20. Given current employment, the marginal product of the last worker in Mexico is 100, and the marginal product of the last worker in the U.S. is 500. Is the firm using the optimal number the output in comparison to its labor cost? explain (1 mark) b. If it is not what should the firm do? (1 mark). BL 3. Consider the demand for gasoline is P = 5 - 0.002q and the supply is P = 0.2 + 0.0044, calculate the amount of consumer surplus and producer surplus without government intervention (2 Marks). A firm total revenue curve is given by TR = aQ - 2Q-. Is this a perfectly competitive firm? Explain why or why not. (2. Marks) 5. There are ten firms producing bicycles (q). The firms are identical with each firm having the following cost function C = ; 24 - 43+ 94. The market for bicycles is competitive (firms are all price takers) with demand for bicycles given by q = 90 - 2p At what price will firms shut down? (1 Mark). Derive the short run industry supply function. (1 Mark).