SUBJECT: Economics

1. Consider the perfectly competitive market for French fries. Refer to the figure that shows the cart curves for 0h Potato. a typical firm that sells FrEHch tries, to answer the following questions. Frlclol' a Buckner! French Fries. P1600 F'Hil F1250 Plum P am F 6W FdDEI P200 Euclim at French Frill 4 Iii- B 10 1? 14 15 a. Which oi" the following illustration in the gure above depicts the range of consumers that Oh Potato can cater to in the market for French fries? Explain why it is illustrated as such. [1 point] b. if the market price of a bucket of French fries is Php 1 2. how many buckets of French fries will h Potato have to sell in order to maximize its prots? (1 point] c. At this prot'maximizing quantity,r of French fries that till Potato will sell when the price ofa bucket of French fries is Php 12: i, How much will fill Potato's total revenues be? [1 point] ii. How much will it cost h Potato to produce each bucket of French fries? (1 point] iii. How much prot will 0h Potato earn? [1 point} d. If there are 25 rms with the same characteristics as 0h Potato in the market. what will the industry supply of French Fries be if the market price oi\" French fries becomes Flip it] per bucket? (1 point] e. if the market price of French fries is Php E: per bucket instead. will 0h Potato earn a positive, negative, or zero prot? {1 point] f. At the market price of Php t3 per bucket. will Uh Potato close its business in the short run? [1 point] 3. At the market price of Pb]; 6 per bucket. will Uh Potato exit the market for French fries in the long run? [1 point] 2. Consider the following information given in the table below in order to answer questions regarding the supply decisions of Vaca Dairy Farm. Suppose that the price of a gallon of milk is 6 pesos, while the fixed cost of producing milk is 3 pesos. Quantity Total Total Cost Profit Marginal Marginal Revenue Change in Revenue Cost Profit DO YOU A W N - O . Fill in the blank columns with the correct quantities. Show your solution. (5 points) b. Plot MR and MC in one graph. Take note of the appropriate elements of a graph. (2 points) c. What does it mean when we assume that Vaca Dairy Farm is a perfectly competitive firm? Using this assumption, discuss the relationship of its MR curve with the market price of a gallon of milk. (2 points) d. From the graph, at what quantity level of milk would the Vaca dairy farm decide to produce if it aims to maximize its profit? Why? (2 points) e. Illustrate what happens if the market price of milk increases to 7 pesos because people now demand more milk as a result of some changes in their dietary 2 consumption. Given this, what can we infer from Vaca dairy farm's MC curve? (2 points)3. Flixlvlolang is the only streaming Service allowed in Townville. As shown in the gure below, its marginal cost curve is constant. P Price. hosts Quantity .1. What kind of market structure exists for streaming services in Townville? {1 point} b. Why does FlintMoLaog face a downward-sloping demand curve? [4 [Joints] c. Describe what Flixhlolang will do. Specically: i. How many memberships will FlixHoLang provide to maximize its prot? [2.5 points] ii. At what price will FliitMoLang provide these memberships? {2.5 points] iii. What will be the total revenue from providing these memberships? {5 points] iv. What witl be the total cost of providing these memberships? {5 points} it. What will be the rm's total prot? [5 points] vi. What principle did you use to determine these gures? [2.5 points} d. If FlixMolaog were to be mandated to mice its memberships at the level that would have prevailed in a perfectly competitive market: i. How man}.I memberships will Fliithiolang provide to minimize its prot? [2.5 points] ii. At what price will FlixMoLang provide these memberships? [2.5 points} iii. What will he the total revenue from providing these memberships? {5 points] iv: What will he the total cost of providing these memberships? [5 points] it. What will be the rm's total prot? {5 points] vi. What principle did you use to determine these gures? (2.5 points] e. By how much does consumer surplus decrease when transitioning from perfect competition to the market structure in [a]? {10 points] i. How much of this decrease in consumer surplus is appropriated by FlixMoLang? [5 points] ii. How much of this decrease is left unappropriated by neither the consumers nor FliicMoLang? What is this called? [5 points]