1.Examine the cost data shown in Table 8-1 above . Calculate the supply decision of a profit-maximizing competitive firm when price is $21, $40, and $60. What would the level of total profit be for each of the three prices?

What would happen to the exit or entry of identical firms in the long run at each of the three prices?

2.Using the cost data shown in Table 8-1 above, calculate the price elasticity of supply between P = 40 and P = 40.02 for the individual firm. Assume that there are 2000 identical firms, and construct a table showing the industry supply schedule. What is the industry price elasticity of supply between P = 40 and P = 40.02?

3.Banana Computer Company has fixed costs of production of $100,000, while each unit costs $600 of labor and $400 of materials and fuel. At a price of $3000, consumers would buy no Banana computers, but for each $10 reduction in price, sales of Banana computers increase by 1000 units. Calculate marginal cost and marginal revenue for Banana Computer, and determine its monopoly price and quantity.

Supply Decision of Competitive Firm (1) (2) (3) (4) (5) (6) Marginal (7) Total cost cost per unit Average cost Price Quantity TC Total revenue Profit MC AC P TR = q x P D = TR - TC (S) (S) (S) (5) ($) (S) 0 55,000 1,000 85,000 27 85 40 40,000 -45.000 2.000 110,000 22 55 40 80.000 -30.000 3.000 130,000 21 43.33 40 120.000 -10.000 3.999 159.960.01 38.98 40.000+ 10 159.960 -0.01 39.99 4.000 160,000 40 40 40 160.000 0 40.01 4,001 160,040.01 40.02 40.000+ 40 160.040 -0.01 5,000 210,000 60 42 40 200,000 -10,000 TABLE 8-1. Profit Is Maximized at Production Level Where Marginal Cost Equals Price