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COB ECON Term 2 AV 2021-2022 Problem Set 3 (35 pts) Instructions: 1. Problem sets are to be submitted individually but you can answer with your classmates. It is advisable that you work on the problem sets alone, and then just check with the others. Grades are on an individual basis. 2. Read the questions carefully and answer only what is required. Show complete solutions, incomplete solutions will not be credited. For final answers that involve decimal places, round off to the nearest 2 decimall places. Box your final answers. 3. Solutions should be neatly hand-written only on one side of any type of clean paper (short bond, long bond, yellow pad, etc.). Make sure that your solutions are presented and organized as clean as possible. 4. Problem sets should be submitted in PDF format and uploaded in the respective assignment section in AnimoSpace. Submissions made elsewhere and type-written will not be accepted. For numbers 1-4, consider the following problem (10 pts): The table below shows data for the production of avocados for an individual firm Operating under a perfectly competitive market. Quanti of avocados Total Revenue Total Costs 3- 0 10 __ 60 30 m- 120 40 .- 180 60 300 130 -- 360 180 420 240 -_ 480 310 1. (7 pts) Given the data, complete the table below Quanti of avocados Marinal Revenue Mar-inal Costs 70 80 2. At what quantity does this firm maximize its profit? (NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!) 3. What is marginal revenue at the profit maximizing quantity? (NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!) 4. What is marginal cost at the profit maximizing quantity? (NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!) For numbers 5-8, consider the following problem (10 pts): The table below shows data for the production of Apples for an individual firm operating as a monopoly. Quantity of apples Price Total Costs 0 600 3,000 10 550 3,750 20 500 4,750 30 450 6,000 40 400 8,500 50 350 12,500 60 300 20,000 70 250 32,000 80 200 43,500 5. (7 pts) Given the data, complete the table below Quantity of Total Revenue Marginal Marginal Costs apples (TR) Profit Revenue (MR) (MC) 0 10 20 30 40 50 60 70 80 6. At what quantity are marginal revenues equal to marginal costs? 7. What is the profit maximizing quantity? (NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!) 8. What is the profit maximizing price? (NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!For numbers 9-11, consider the following problem (3 pts): The table below shows data for the production of Avocados for an individual firm operating under a monOpolistic competition. \"\" m_ -E- -E_ 198,500 258,500 323,500 9. At what quantity are marginal revenues equal to marginal costs? 10. What is the profit maximizing quantity? (NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!) 11 . What is the profit maximizing price? (NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!) For numbers 12-15, consider the following problem (6 pts): Suppose that there is a positive externality in the market for pizza rolls. The graph below shows the supply and demand curves for pizza rolls. 14 13 - 12 1'1 .- O Price of pizza rolls (5) ANthUIOh-JOD'O D l | 0123456?89'|01112'|314 Quantity of pizza rolls 12. What is the market equilibrium quantity? 13. What is the market price? 14. What is the optimal quantity? 15. (3 pts) What should the government do in order to ensure the market produces Optimallefficient quantity? Explain. For numbers 16-19, consider the following problem (6 pts): Suppose that there is a negative externality in the market for pizza rolls. The graph below shows the supply and demand curves for pizza rolls. 14 13 5 (mac) 12 11 1O ' a {MP3} Price of pizza rolls {5) O-'MthIOA'MIG'O 0 1 2 3 4 5 6 T 8 9 10 11 12 13 14 Quantity of pizza rolls 16. What is the market equilibrium quantity? 1?. What is the market price? 18. What is the optimal quantity? 19. (3 pts) What should the government do in order to ensure the market produces optimal/efficient quantity? Explain