BUS 310 University of Washington Ch 7 and 8 Demand Function Problems Homework Hello if you could complete this assignment also all the information you need

BUS 310 University of Washington Ch 7 and 8 Demand Function Problems Homework Hello if you could complete this assignment also all the information you need will be in the file to complete the work. Homework 3
Chapters covered: Ch. 7 and Ch. 8
Due date: July 21, 2020 at 10 pm
B BUS 310, Summer 2020
There are 4 problems in this homework for a total of 40 points. In order to receive full credit for your answers on the
homework you will need to show your work (calculations & reasoning). If a homework answer is turned immediately
after the due date, your score will be reduced by 10% of the maximum homework grade. Additional 10% will be
deducted from your score for every 6 hours after that. You are allowed to discuss the material or the assignments
with your colleagues for a better understanding. However, you should use your own words and calculations to write
your answers. The homework answers will be uploaded into Canvas before the due date in the form of a Word
document (.docx or .doc), text (txt), pdf, or a rich text file (rtf) format unless otherwise specified.
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1. A firm is facing a demand function given by q = 100 – 3 P and its cost function is C(q) = 1,500 +2q2.
a.
b.
c.
d.
Write the inverse demand function for this firm.
What is the profit-maximizing level of output?
What is the maximum profit the firm can earn?
The firm has to pay a tax equal with 25% of its revenue. What is the new profit-maximizing level of output?
How much profit does it make?
2. Suppose that you are making boots and one unit of equipment costs $20/ hour and each worker earns $15/hour.
a. Use the information above and the formulas discussed in Ch. 6 to fill in the table below
b. If the price of boots is $75, what is the maximum amount of boots that you should you make in order to
maximize profits?
c. What is your maximum profit?
Output
Equipment
0
1
2
3
4
2
2
2
2
2
Workers
Fixed
Cost
Variable
Cost
Total
Cost
Marginal
Cost
0
1
4
9
16
3. The manager of Davy Company recently hired an economist to estimate the firm’s cost function. Based on
estimates provided by the economist, the firm’s total cost function is C(q) = 50 + 4q + 2q2, where q is the level of
output.
a.
Find the marginal cost (MC), average cost (AC) and average variable cost (AVC) functions. Show
these curves on a graph (the AC curve, will be a U-shaped curved).
b.
If the price of output is $28, how much output should the firm produce in the short run? What
will the profit level be?
c.
What is the firm’s producer surplus if the price of output is $28?
d.
At what minimum price will the firm produce a positive output in the short run (choose to
operate rather than shutdown)?
e.
Find the level of output that minimizes average cost.
f.
At what range of prices will the firm earn a negative profit?
Question 4 is on the next page!
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4. Suppose you are given the following information about a particular industry (perfect competition):
QD = 6500 −100P
S
Q = 1200P
C(q) = 500 +
Market demand
Market supply
1 2
q
50
Firm total cost function for an individual firm
a. Find the equilibrium price & quantity in the market, the output supplied by the individual firm, and
the profit of each firm.
b. Would you expect to see entry into or exit from the industry in the long run? Explain. What effect
will entry or exit have on market equilibrium price & quantity?
c. Focus on the market. The government imposes a price ceiling (maximum price) of $3. Find the
new consumer (CS), producer surplus (PS) and deadweight loss (DWL).
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