Consider a profit-maximizing firm which is the only seller in a particular market. The firm's marketing research department has estimated the demand for, and the marginal revenue from your firm's product is described by the following equations: P = 100 - 0.01Q and MR = 100 - 0.02Q. Consider that the firm's cost structure is described by the following equations: MC = 40 + 0.02Q and AVC = 40 + 0.01Q. Furthermore, the firm's only fixed cost is the $24000 lease payment it has for the fully furnished building it rents.
5. What is the deadweight loss associated with the current market outcome? (4 points) Complete the sentences by entering a numerical value (0.00 is acceptable) in the blank space provided: Given the current market outcome, the deadweight loss is $ 6. What is the price elasticity of demand at the current price being charged? (6 points) Complete the sentences by entering one of the following phrases in the blank spaces provided: in the 1St blank space: a numerical value in the 2nd and 3d blank spaces: A = a decrease | B = an ambiguous change | C = an increase | D = no change At the current price being charged, the price elasticity of demand is One can conclude that a decrease in the price of the good would lead to in the quantity demanded and in the firm's total revenue. Consider that a shock to the economy affects the firm's cost structure. This shock has led to a decrease in the firm's variable cost (marginal cost and average variable cost are now lower) and a decrease in the lease agreement. As a result, the firm's new cost structure is defined by the equations: MC = 20 + 0.02Q and AVC = 20 + 0.01Q. Additionally, the lease payment decreases by $4000. Consider that the firm fully adjusts after the shock. 7. After the market adjusts, what is the new market outcome? (6 points) Complete the sentence by entering a numerical value (0.00 is acceptable) each the blank space provided. After the market adjusts to the economic shock, the firm is now producing units of output and charging a price of $ per unit. 8. After the market adjusts, how much economic profit (or loss) is the firm earning? (5 points) Complete the sentences by entering one of the following phrases or a numerical value (0.00 is acceptable) in the blank space provided: in the 1st blank space: A = loss | B = profit in the 2nd blank space: a numerical value After the market adjusts to the economic shock, the firm is now earning an economic of $ 9. Did the economic shock affect consumers? (6 points) Complete the sentences by entering one of the following phrases or a numerical value (0.00 is acceptable) in the blank space provided: in the 1st blank space: A = a positive effect | B = a negative effect | C = no effect in the 20d blank space: D = decreases | E = does not change | F = increases in the 3d blank space: a numerical value One can conclude that the economic shock has on consumers as consumer surplus by $
