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Calculating Exercises

This document contains 10 practice exercises involving calculating market equilibrium, effects of price controls, and profit maximization for firms with given total cost functions. Equilibrium price and quantity, as well as effects of price floors and ceilings, must be determined for markets with linear demand and supply functions. Profit-maximizing output and break-even points must be found for firms with quadratic cost functions.

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13 views2 pages

Calculating Exercises

This document contains 10 practice exercises involving calculating market equilibrium, effects of price controls, and profit maximization for firms with given total cost functions. Equilibrium price and quantity, as well as effects of price floors and ceilings, must be determined for markets with linear demand and supply functions. Profit-maximizing output and break-even points must be found for firms with quadratic cost functions.

Uploaded by

min - radise
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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MORE EXERCISES TO SELF PRACTICE

1. A market has the demand function and the supply function as follows:
Qd = -P + 15
Qs = 2P + 6
a. Determine equilibrium price and equilibrium quantity
b. If the government imposes a price ceiling of $7, does a shortage or
surplus (or neither) develop? What are the price, quantity supplied,
quantity demanded, and size of the shortage or surplus?
c. If the government imposes a price floor of $7, does a shortage or surplus
(or neither) develop? What are the price, quantity supplied, quantity
demanded, and size of the shortage or surplus?

2. A market has the demand function and the supply function as follows:
Qd = -2P + 5
Qs = P + 2
a. Determine equilibrium price and equilibrium quantity
b. If the government imposes a price floor of $2, does a shortage or surplus
(or neither) develop? What are the price, quantity supplied, quantity
demanded, and size of the shortage or surplus?
c. If the government imposes a price ceiling of $2, does a shortage or
surplus (or neither) develop? What are the price, quantity supplied,
quantity demanded, and size of the shortage or surplus?

3. A market has the demand function and the supply function as follows:
Qd = -3P + 6
Qs = 2P + 1
a. Determine equilibrium price and equilibrium quantity
b. If the government imposes a price ceiling of $3, does a shortage or
surplus (or neither) develop? What are the price, quantity supplied,
quantity demanded, and size of the shortage or surplus?

4. A market has the demand function and the supply function as follows:
Qd = -3P + 35
Qs = 2P + 3
a. Determine equilibrium price and equilibrium quantity
b. If the government imposes a price floor of $5, does a shortage or surplus
(or neither) develop? What are the price, quantity supplied, quantity
demanded, and size of the shortage or surplus?

5. A market has the demand function and the supply function as follows:
Qd = -2P + 30
Qs = P + 12
a. Determine equilibrium price and equilibrium quantity
b. If the government imposes a price ceiling of $5, does a shortage or
surplus (or neither) develop? What are the price, quantity supplied,
quantity demanded, and size of the shortage or surplus?

6. Total cost function of a perfectly competitive firm is:


TC = Q + 3Q + 37.5
2

a. At P = 30$, calculate Q* and Profit MAX

b. Calculate the break-even point of this firm


c. At P = 15 $, does this firm earn profit or get loss? Indentify the
profit or loss. In case the firm gets loss, should it shut down or
continue to produce? Why.
7. Total cost function of a perfectly competitive firm is:
TC = Q + Q + 169
2

a. At P = 55$, calculate Q* and Profit MAX

b. Calculate the break-even point of this firm


c. At P = 25 $, does this firm earn profit or get loss? Indentify the
profit or loss. In case the firm gets loss, should it shut down or
continue to produce? Why.
8. Total cost function of a perfectly competitive firm is:
TC = Q + 4Q + 625
2

a. At P = 60$, calculate Q* and Profit MAX

b. Calculate the break-even point of this firm


c. At P = 44 $, does this firm earn profit or get loss? Indentify the
profit or loss. In case the firm gets loss, should it shut down or
continue to produce? Why.
9. Total cost function of a perfectly competitive firm is:
TC = Q + 3Q + 196
2

a. At P = 35$, calculate Q* and Profit MAX

b. Calculate the break-even point of this firm


c. At P = 21 $, does this firm earn profit or get loss? Indentify the
profit or loss. In case the firm gets loss, should it shut down or
continue to produce? Why.
10. Total cost function of a perfectly competitive firm is:
TC = 2Q + Q + 288
2

a. At P = 61$, calculate Q* and Profit MAX

b. Calculate the break-even point of this firm


c. At P = 25 $, does this firm earn profit or get loss? Indentify the
profit or loss. In case the firm gets loss, should it shut down or
continue to produce? Why.

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