Bibi Mobile is the only authorized producer in producing smart phone in Country X which is a small country. Its annual revenue is $4,000,000 and the average total cost per smart phone produced is $5,000. The marginal revenue function and the marginal cost functions are as below. Marginal Revenue function: MR = 12,000- 100 Marginal Cost function: MC = 2,000 + 150 where Q represents quantity. (a) Define the market structure of Bibi Mobile. (2 marks) (b) State the profit maximization condition. According to this condition based on the given information, calculate the profit maximizing price and quantity of Bibi Mobile? What is the total profit (loss) earned by this company? (4 marks) (c) Based on the given information and your answers in part (b), illustrate the situation with a diagram and label the critical data related to price, quantity, cost and profit (loss) condition in the diagram. No explanation is needed. (3 marks) (d) Suppose there is an increase in the minimum wage in Country X and most of the workers are paid on this wage level in Bibi Mobile. Bibi Mobile has recorded a break-even state of profitability afterwards. Illustrate this situation in the same diagram of part (c). Explain. (6 marks)Happy Coconut is one of the 500 price taking firms in selling bottles of coconut juice which is a perfectly competitive market in Country H. The equilibrium price of coconut juice is $46 per bottle. The following table presents the costs at different output levels for this company. Output (Bottles of Total Cost Marginal Cost Average Total Cost Coconut Juice) (dollars) (dollars) (dollars) 0 30,000 N.A. N.A. 500 39,000 18 78 1,000 45,000 12 45.0 1,500 55,000 20 36.7 2,000 70,000 30 35.0 2,500 93,000 46 37.2 3,000 11,7000 48 39.0 (a) What are the profit maximizing output quantity and price of Happy Coconut? What is the amount profit (loss) made by the company? Show your workings. Explain briefly. (3 marks) (b) Based on the given information and your answers in part (a), draw a set of market-firm diagram and label the critical data of price, quantities, average variable cost and average total cost at the profit-maximizing quantity. Clearly indicate the profit (loss) area in your diagram. No explanation is needed. (6 marks) (c) Suppose there has been a bad harvest of the coconut. Explain how this affects the market of coconut juice and how to make the Happy Coconut suffers from bad time. Explain and illustrate this situation in the same market-firm diagram of part (b). (11 marks) (Remark: Significant mark deduction if the instruction is NOT followed and a new set of diagram is drawn for illustration of part (c) separately.)
