Perfect Competition and the Supply Curve Case Assignment
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Perfect Competition and the Supply Curve Case Assignment
Unit 7 [Microeconomics] Unit 7 Assignment: Perfect Competition and the Supply Curve
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Unit Number: – 7
Date: –
Problem 1
Joe Brown’s dairy operates in a perfectly competitive marketplace. Joe’s machinery costs $500 per day and is the only fixed input. His variable costs are comprised of the wages paid to the few workers he employs at the dairy and the grain he feeds to his dairy cows.
The variable cost associated with each level of output is given in the accompanying table.
Gallons of Milk Variable Cost 0 – 1000 $ 2,100 2000 $ 2,200 3000 $ 2,900 4000 $ 3,680 5000 $ 5,180
- Calculate the total cost, the marginal cost per unit, the average variable cost, and the average total cost, for each quantity of output.
Gallons of Milk
FC VC TC MC AVC ATC 0 $500 – – – – 1000 500 $ 2,100 2000 500 $ 2,200 3000 500 $ 2,900 4000 500 $ 3,680 5000 500 $ 5,180
- What is the break-even price?
- What is the shut-down price?
- Suppose that the price at which Joe can sell milk is $1.50 per gallon. In the short run, will Joe earn a profit?
- In the short run, should he produce or shut down?
- Now suppose that the price at which Joe can milk is $1.00 per gallon. In the short run, will Joe earn a profit?
- In the short run, should he produce or shut down?
- Finally, Suppose that the price at which Joe can sell milk is $0.75 per gallon. In the short run, will Joe earn a profit?
- In the short run, should he produce or shut down?
Problem 2
Suppose that Media Cable is a single-price monopolist in the market for cable in Anywhere, Iowa. Media has five potential customers: Morgan, Larry, Clyda, Janet, and Tom.
Each of these customers are willing to purchase cable service, but only if the price is just equal to, or lower than, his or her willingness to pay. Morgan’s willingness to pay is $130; Larry’s, $100; Clyda’s, $80; Janet’s, $40; and Tom’s, $0.
Media Cable’s marginal cost per cable package is $40. The demand schedule for cable service packages is shown in the accompanying table.
Price of Cable Service Quantity of Cable Service Demanded 160 0 130 1 100 2 80 3 40 4 0 5
- Calculate Media Cable’s total revenue and its marginal revenue
Price of Cable Service
Qty of Cable Service demanded
Total Revenue Marginal Revenue $160 0 – 130 1 100 2 80 3 40 4 0 5
- Explain why a monopolist, such as Media Cable, faces a downward-sloping demand curve
- Explain why the marginal revenue from an additional sale is less than the price of the service
- Suppose Media Cable currently charges $80 for its service. If it lowered the price to $40, how large is the price effect?
- How large is the quantity effect?
- What is the profit maximizing quantityand pricefor Media Cable?
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References:
Microeconomics: Unit 7 Assignment: Perfect Competition and Monopoly Content (15 points) Points Possible Points Earned Problem 1: Perfect Competition Joe Brown’s Diary For each quantity of output: (a)
· Correctly calculated total costs.
· Correctly calculated marginal cost per unit.
· Correctly calculated average variable cost.
· Correctly calculated average total cost.
2 · Correctly calculated the break-even price. (b) · Correctly calculated the shutdown price. (c)
1 · Discussed if a profit can be earned at $1.50 per gallon. (d) · Discussed if Joe should produce or shut down if the price per gallon is $1.50. (e)
2 · Discussed if a profit can be earned at $1.00 per gallon. (f) · Discussed if Joe should produce or shut down if the price per gallon is $1.00. (g)
2 · Discussed if a profit can be earned at $0.75 per gallon. (h) · Discussed if Joe should produce or shut down if the price per gallon is $0.75. (i)
2 Problem 2: Monopoly Media Cable Company · Correctly calculated the total revenue and the marginal revenue. (a)
· Explained downward slopping monopolist demand curve. (b)
· Explained why the marginal revenue from an additional sell is less than the price of the service. (c)
· Correctly calculated the price effect. (d)
· Correctly calculated the quantity effect. (e)
· Correctly calculated profit maximizing quantity and price. (f)
6 Analysis (6 points) Work demonstrates synthesis of concepts, research, and experience. 2 Work demonstrates the student’s ability to tie relevant information to real-life applications. 2 Analysis exceeds basic comprehension to demonstrate higher-order thinking. 2 Writing (4 points) Correct use of APA 6th edition format, all sources used to support the paper are referenced 2 Sentences are clear, concise, and direct; tone is appropriate, spelling, grammar, and punctuation are correct. 2 Total 25 Perfect Competition and the Supply Curve Case Assignment
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper.
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