2 ECON 247: Assignment 2B Due Date: After you have completed Unit 10 Credit Weight: 10% of your final grade 1. a. Explain why the demand-for-labour curve is downward sloping. (4 marks) b. A textile...

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2 ECON 247: Assignment 2B Due Date: After you have completed Unit 10 Credit Weight: 10% of your final grade 1. a. Explain why the demand-for-labour curve is downward sloping. (4 marks) b. A textile firm has decided to lay off 2000 workers. How would this decision impact the marginal product of workers and the wage rate? Why did the textile firm not lay off more than 2000 workers? (4 marks) 2. Units of labour and units of output are given in the following table. a. Complete the MPL marginal product of labour (MPL) and the value of the marginal product of labour (VMPL1) and complete the columns for each. Assume that the firm sells its products in a competitive market for $20 per unit. If the wage rate is $200, how many workers will this firm hire to maximize its profit? Explain your answer. (5 marks) Units of Labour Units of Output MPL VMPL1 VMPL2 1 10 2 19 3 27 4 34 5 39 6 42 b. Calculate the VMPL for a unit price of $25 per unit and complete the VMPL2 column with this data. If the wage rate is still $200, how many additional workers will this firm hire to maximize its profit? Explain your answer. (4 marks) c. What will happen to the demand curve for labour if the price increases from $20 to $25 per unit? Explain your answer. (3 marks) 3. In the long-run equilibrium of a competitive market with identical firms, what is the relationship between price (P), marginal cost (MC), and average total cost (ATC)? (4 marks) 4. A competitive firm is selling its product. The price for its product is $8. a.Complete the TC, AFC, AVC, ATC, MC, TR, MR, and profit columns. Round off your answers to two decimal places. (8 marks) Total product TFC TVC TC AFC AVC ATC MC TR MR Profit 0 $8 $0 1 $8 $15 2 $8 $20 3 $8 $29 4 $8 $48 5 $8 $83 6 $8 $140 7 $8 $225 8 $8 $344 9 $8 $503 10 $8 $708 b.At what price and output level will the above firm maximize its profit or minimize its loss? Should this firm continue to sell in the short run? Should it continue to sell in the long run? Explain your answer. (2 marks) c.Based on the table, what is the important relationship between ATC and MC? Also, explain why AVC and ATC are U-shaped. (4 marks) 5. What long-run effect will an increase in market demand have on a constant-cost industry (a horizontal supply curve)? (6 marks) 6. Explain why cartels are often ineffective in keeping the price of their products high. Use an example of an actual cartel arrangement to support your answer. (6 marks) 7.Why do firms advertise? What are some advantages and disadvantages of advertising? (6 marks) 8. A local public transit (monopoly) sells monthly bus passes to adults and students. The demand elasticity for bus passes by adults is –0.25, whereas demand elasticity by students is –0.50. Their demand schedules are given in the following table: Adults Students P Q TR P Q TR 35 245 8575 35 268 9380 45 230 10350 45 238 10710 55 215 11825 55 208 11440 65 200 13000 65 178 11570 75 185 13875 75 148 11100 85 170 14450 85 118 10030 95 155 14725 95 88 8360 105 140 14700 105 58 6090 a.Currently, the transit is charging $85 for bus passes. What is the current total revenue? (2 marks) b.Should the transit increase or decrease the price for adults? Should the transit increase or decrease the price for students? (2 marks) c.What price will maximize the total revenue from adult customers? (2 marks) d.What price will maximize the total revenue from student customers? (2 marks) e.What would be the total revenue from both groups? (2 marks) f.List and explain two conditions necessary for public transit to be able to successfully practice price discrimination. (4 marks) 9. Differentiate between the monopolistic competitive and oligopoly market structures.(8 marks) 10.The data for a monopolistically competitive firm is given below: Quantity P TR MR TC MC ATC Profit 1 72 92 2 68 142 3 64 186 4 60 234 5 56 284 6 52 336 7 48 392 8 44 450 a. Complete the above table. (6 marks) b. What output will this monopolistically competitive firm produce? (2 marks) c.Is this firm experiencing excess capacity? If yes, calculate how much. (6 marks) 11. An owner of a local convenience store has put $300,000 into his business. Before starting his business, he was working in a restaurant. His annual salary was $25,000 per year. Savings accounts are currently paying 5% annual interest. The owner’s total annual sales from the business are $60,000. His annual expenses are merchandise ($3000), rent ($1000), insurance ($500), and advertising ($200). a.What is his annual accounting profit? (2 marks) b.What is his annual economic profit? (2 marks) c.Should this owner continue with his convenience store business? (2 marks) d.Is it possible for a firm to incur an economic loss and earn an accounting profit at the same time? Explain. (2 marks) ECON247v11_Assignment_2B© Athabasca University March 3, 2021
Answered Same DayJun 07, 2021

Answer To: 2 ECON 247: Assignment 2B Due Date: After you have completed Unit 10 Credit Weight: 10% of your...

Komalavalli answered on Jun 07 2021
131 Votes
ECON 247: Assignment 2B
Q1.
a.
The greater the wage of labor, demand for labor. Hence, it results in downward demand for the labor curve. As in all markets, income/substitution effects might explain a downward drop in the demand curve. With increased income, companies are trying to replace labor capital or cheaper l
abor. Moreover, if companies continue to use the same amount of work, their work expense will increase and their revenue (profits) will decrease. Labor demand will reduce as wages increase, for both reasons.
b.
A profitable company will employ employees until the actual salary and the marginal product of labour are equal. If the marginality product exceeds the real salary, the value of the marginal product exceeds the cost of hiring a supplementary employee (the real salary), and if the employee is employed, profits shall grow. In this scenario, the marginal product looks to be lower than the real wage, hence the value of the marginal output is lower than the cost of employing an additional worker (real wages). They have probably ceased laying off 2,000 people, as it is when the real salary and the marginal output of labour is equal, therefore profit is maximized. By releasing 2000 workers, the MPL will grow.
Q2
a.
    Units of Labour
    Units of Output
    MPL
    VMPL1
    1
    10
    10
    200
    2
    19
    9
    180
    3
    27
    8
    160
    4
    34
    7
    140
    5
    39
    5
    100
    6
    42
    3
    60
In order to maximize profit the firm will hire labor VMPL1=w
From above calculation we can say that the firm will hire 1 unit of labor where VMPL1=w=200.
b.
    Units of Labour
    Units of Output
    MPL
    VMPL1
    VMPL2
    1
    10
    10
    200
    250
    2
    19
    9
    180
    225
    3
    27
    8
    160
    200
    4
    34
    7
    140
    175
    5
    39
    5
    100
    125
    6
    42
    3
    60
    75
In order to maximize profit the firm will hire labor VMPL2=w
From above calculation we can say that the firm will hire 3 units of labor where VMPL2=w=200.
c.
If price increases from $20 to $25 per unit then the demand for labor shifts upward, the increase price will result in more production of outputs.
Q3.
In the long-run equilibrium of a competitive market with identical firms, the relationship between price (P), marginal cost (MC), and average total cost (ATC) is P=MC, P=ATC.
Q4.
a.
    Total product
    TFC
    TVC
    TC
    AFC
    AVC
    ATC
    MC
    TR
    MR
    Profit
    0
    $8
    $0
    $8
     
     
     
     
    0
     
    -8
    1
    $8
    $15
    $23
    8.00
    $15
    $23
    $15
    8
    8
    -15
    2
    $8
    $20
    $28
    4.00
    $10
    $14
    $5
    16
    8
    -12
    3
    $8
    $29
    $37
    2.67
    $10
    $12
    $9
    24
    8
    -13
    4
    $8
    $48
    $56
    2.00
    $12
    $14
    $19
    32
    8
    -24
    5
    $8
    $83
    $91
    1.60
    $17
    $18
    $35
    40
    8
    -51
    6
    $8
    $140
    $148
    1.33
    $23
    $25
    $57
    48
    8
    -100
    7
    $8
    $225
    $233
    1.14
    $32
    $33
    $85
    56
    8
    -177
    8
    $8
    $344
    $352
    1.00
    $43
    $44
    $119
    64
    8
    -288
    9
    $8
    $503
    $511
    0.89
    $56
    $57
    $159
    72
    8
    -439
    10
    $8
    $708
    $716
    0.80
    $71
    $72
    $205
    80
    8
    -636
b.
The loss is minimized by producing zero output at price $8.The firm should shut down its production activities in short...
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