Economics 1102 - Homework #8
Part I. Define or explain briefly.
(1) Quasi-fixed costs
(2) marginal cost
(3) Cost in economics versus cost in accounting
True or false. Explain (be sure to).
(4) If the behavior of sellers obeys the assumptions of economic theory, then the supply schedule
summarizing the behavior of sellers is always positively sloped, i.e., an increase in sales is always
associated with a higher price.
Quantitative question.
(5) Below are cost data, and market demand curve data, for the production of tomatoes in the Delaware
valley. Find the short run and long run competitive equilibrium market price, quantity, number of sellers,
the long run price and quantity for sellers forming a monopoly, and other results presented in the tabular
format below. Assess the efficiency of the long run monopoly solution compared to the long run
competitive solution. Place your answers in the appropriate places below
Product = Tomatoes
Demand Shift Coefficient (A) = 56000
Demand Slope Coefficient (B) = 460
Quasi-Fixed Cost (QFC) = 2500
True Fixed Cost (TFC) = 4000
Cost Parameter (E) = .1
Short Run # of Firm Units (M) = 20
Short Run: Perfect Competition
Market Price =
Market Equilibrium Quantity =
Firm Unit Equilibrium Quantity =
Shut Down Price =
Break Even Price =
Short Run Price Elasticity of Demand =
Number of Operating Firm Units =
Long Run: Perfect Competition
Market Price =
Market Equilibrium Quantity =
Firm Unit Equilibrium Quantity =
Number of Operating Firm Units =
Long Run: Monopoly
Equilibrium Price =
Equilibrium Quantity =
Firm Unit Equilibrium Quantity =
Number of Operating Firm Units =
Evaluation of Alternative Markets
Long run monopoly profit =
Increase in consumers’ surplus in the long run competitive case versus long run monopoly case
Change in consumers’ surplus = ___________ = pay less (= ______) + consume more (=_________)