microeconomics p19

Microeconomics

Anna Blajer-Goiębiewska M. Sc.

Exercise 13. Building contractor ‘BOB’ has got an order to build few shopping pavilions in a village. Client gives the price of PLN 16 000 for each pavilion which is parameterized due to the contract. The cost of building one pavilion is estimated to be PLN 12 000. Moreover there are other costs that are not directly dependent from the production (for instance accounting Staff salaries, insurance costs, depreciation costs) and these are estimated to amount PLN 48 000. How many pavilions will enable ‘BOB’ company to reach their break even point?

Exercise 14. Fili in the table assuming that the price of the product remains the same, while the level of production in changing. Find the level of production that will maximize the company’s profit.

X	TC	TVC	TFC	AVC	AFC	ATC	MC	P	TR	MR	WE
0	60	0						80
1		40
2		70
3		120
4		220
5		400
6		630

Exercise 15. Assuming that the company is maximizing profit describe the situation, when:

▲

a)	P> ATC
b)	P = ATC
c)	ATC > P > AVC
d)	P = AVC
e)	AVC > P

Exercise 16. Fili in the table assuming that there are no fixed costs, the price for the product equals $2 and the price of the only one direct materiał is $7.

A	Pa	TC	Px	TP	TR	WE

Exercise 17. Fili in the table.

Cu

ci

TC

VC

FC

ATC

AVC

AFC

MC

X

P

TR

WE

35

Min=25

10

5

30

Exercise 18. Fili in the table.

Cu

Cj

TC

VC

FC

ATC

AVC

AFC

MC

X

P

TR

WE

30

45

Min=

20

200

80

Exercise 19. Explain, in what way sunk costs creates our inability to make elear decisions about:

a)    US’s involvement in Iraq.

b)    going or not watching the basketball gamę with your friend, if there is a big snowstorm and you have already bought tickets (each cost $50). Would you be morę likely to go if the tickets were given to you for free?

c)    a cutting-edge digital product, that is not successful in the marketplace, but the costs associated with the product development (in the form of research & development and intellectual property, labor) were significant.

d)    choosing commercial partners in the case of an exporter analysing foreign markets.

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