This assignment is for my microeconomics class. I already completed numbers 1 an
ID: 1116183 • Letter: T
Question
This assignment is for my microeconomics class. I already completed numbers 1 and 2 but could you help me with numbers 3 and 4?
hapter 11 198 Economic Consultants 11 Equilibrium Street Harrisburg, PA Dear Economic Consultant, My firm produces bicycles. The market price for the bicycles is currently $500, and we have been producing 13 bicycles per week. I don't believe that my firm could be doing any better producing any other level of output (we are currently breaking even). We are asking you to complete the following tasks for us: 1. I would like for you to look into our production choices and give us your expert opinion as to whether we could improve our weekly profit (see the cost schedule on the back). Please include the appropriate graphs in your discussion. If improvement is possible, let us know how many bicycles we should sell and what profit could we expect. Also please make a short run supply schedule for our firm (assume that only whole bicycles can be produced). What quantity of bicycles should we supply at a market price of 200, 250, 300, 350, 400, 500, and 600? 2. Our market analysts believe that the demand for bicycles may fall in the near future. Currently, there are 100 firms in the industry that are identical to ours (which means each firm's supply decision is the same). We predict that, within our short run time frame, market demand will fall to the level indicated by the table below 3. $200 $250 $300 $350 $400 $500 $600 1800 1600 1400 1200 1000 600 200 Price Market Qd Market Qs What will the new equilibrium market price be if demand falls? Given new price, how should we react to maximize profit in the short and long run? Please explain. 4. What will happen to the number of firms (increase, decrease, no change) in the bicycle industry in the short and long run? Discuss (illustrate discussion with the appropriate graphs). Please provide my firm with a typed report in which you analyze our situation and discuss the answers to all our questions by the time of our meeting on ThurExplanation / Answer
price 200 250 300 350 400 500 600 Market Qd 1800 1600 1400 1200 1000 600 200 Market Qs 1300 1300 1300 1300 1300 1300 1300 Equilibrium Price is where Qs = dQd Demand curve :P = a-bQ 200 = a-b*1800 400 = a -1000b b = 50/200 = 0.25 a = 650 DEMAND CURVE P = 50-0.25Q supply is inelastic at Q= 1300 Thus P = 650-0.25*1300 P = 325 IN the short run firm must reduce output while it must exit the industry in the long run. 4) In the short run no change in the numer of firms each firm want to minimize loss In the long run the number of firms will decrease.