# Microeconomics Wa 3

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Microeconomics Wa 3
Microeconomics
WA3
1. At its current level of production, a profit-maximizing firm in a competitive market receives \$12.50 for each unit it produces and faces an average total cost of \$10. At the market price of \$12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1000 units. What is the firm's current profit? What is likely to occur in this market, and why? Total rev | 12500 | Total costs | 10000 |
TC=ATC(Q) = 10 ( 1000) = 10000
Profit=TR-TC = 12500 - 10000 = 2500
In this case, the profit is positive however for perfectly competitive markets in this situation, there will be zero profits in the long-run.
In this market, new firms will enter the market because of the attraction to profits which will increase market supply and reduce equilibrium price until it reaches close to P=\$10, consequently leading to zero economic profits in long-run. In the case where a lower price is forced, this firm will be pressed to reduce output some with the new equilibrium P=MR=MC 2. In order to determine whether time is being spent optimally, a commercial fisherman has recorded the following information over the past year: "hours spent fishing" and "quantity of fish caught." What is the marginal product of fishing for hour spent?

Hours/day | Total Quantity of Fish (tons) | Marginal Product | 0 | 0 | 0 | 1 | 10 | 10 | 2 | 18 | 8 | 3 | 24 | 6 | 4 | 28 | 4 | 5 | 30 | 2 | 6 | 31 | 1 |

3. The fisherman has a fixed cost of \$200 per day and variable costs of \$150 per hour (wages and fuel). a. Fill in the information missing in the following table. Hours/ day | Total Fixed Costs | Total Variable Costs | Total Costs | Marginal Costs | 0 | 200 | 0 | 200 | 0 | 1 | 200 | 150 | 350 | 150 | 2 | 200 | 300 | 500 | 150 | 3 | 200 | 450 | 650 | 150 | 4 | 200 | 600 | 800 | 150 | 5 | 200 | 750 | 950 | 150 | 6 | 200 | 900 | 1100 | 150 | b. The fish sell for \$100 a ton. How many hours fishing per day he work

References: 1. Desai, Vandan Microeconomics . Chapter 15: Monopoly. Retrieved February 2012 from: http://davidprudente.files.wordpress.com/2008/12/mankiw-monopoly-chapter-outline.pdf 2. Riley, Geoff A2 Markets and Market Systems Retrieved February 2012 from: http://tutor2u.net/economics/revision-notes/a2-micro-oligopoly-overview.html 3. Mankiw, Gregory Principals of Economics 6th Edition Retrieved February 2012 from: http://www.unm.edu/~parkman/M17.pdf 4. Lecture Notes Retrieved February 2012 from: http://www.albany.edu/~aj4575/LectureNotes/Lecture30.pdf 5. Maniw, Gregory (G.W.)2009 Principles of Microeconomics 5e.Ohio.South-Western Cengage Learning 6. Monopolistic Competition Retrieved February 2012 from: http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&amp;c=dsp&amp;k=monopolistic+competition

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