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# P7.

a) mr = 10-2x and mr = 4
10-2x = 4
X=3
So, the firms output level = 3
b) tr = 21, x = 3
p = 21 / 3 = 7
So, the firms price = \$7
c) Short-run average total costs stands at its minimum point, thats why it
equals to mc
mc = mr = 4
So, short-run average total costs = \$4
d) Total cost = average total costs * output level
Total cost = \$4 * 3 = \$12
e) As it was mentioned before, mc = mr = 4 according to profit maximization
f) Short-run profit = total revenue total cost
Short-run profit = \$21 - \$12 = \$9
P8.
a) The profit-maximizing output for Calypso (where mr = mc) equals 2 cubic
feet a day. The price equals 6 cents per a cubic foot. Producer surplus = 8
cents, consumer surplus = 4 cents, deadweight loss = 4 cents.
b) If Calypso is regulated to make zero economic profit, they produce the
output level, where price = average total cost (D curve and ATC curve
intersection). Calypso produces 3 cubic feet a day at 4 cents per a cubic
foot. Producer surplus = 6 cents, consumer surplus = 4 cents, deadweight
loss = 1 cent.
c) Calypso produces the quantity where price = marginal cost (D curve and
MC curve intersection). Calypso produces 4 cubic feet a day at 2 cents per
a cubic foot. Producer surplus = 0, consumer surplus = 16 cents,