PROBLEMS 249 following hourly costs "1 Quick Copy is one of the many copy shops in London. Output Total cost A price taker. It has the “The figure shows Quick Copy's cost curves. totss pochesrt| | iesantepar how ° 0 Me ae 1 a 2 20 3 a 4 5 5 69 ‘2 What is Pa's profitmaximizng output and how snuch profit does Pat make if the market price is @) ‘ €14 a pizza, (3) €12 a pizza and (is) €10 a pizza? bb What is Pats shutdown point? 2 © Derive Pat's supply curve, cd What isthe long-run equivium price of pizzas? oa 8851085 cy beges prow) 4 igi’ Lasagna sa price taker. Its costs ae: output Total cost 8 Ifthe mazket price of copying one page is 10 pence, ip meee what is Quick Copy’s profit maximizing output? ° 1 bb Calculate Quick Copy's profit fl Es © With no change in demand or technology, how will 2 8 te price change inthe long un? 3 62 4 80 2. Bob's is one of many burger stands at Leeds United 5 B footbal stadium, The figuee shows Bob's cost curves. 3 eB ‘@. What is Luigi's proft-maximizing output and how Be Me ye uch profit does he make ifthe market price is @) 2 24 a plat, i) €20a plat ad (i) 12 pats? is Beta ae eee eee L- pote el reat erietereee teense etfeee zy ase genre gas ety : #5, The EU markt demand schedule fr pop CDs Price Quantity demanded : tewerperco) ebay wea a6 00000 on esas a ate a a cera any forge edo 520 ‘0000 00 ‘25000 @ If the market price of a burger is £4, what is Bob's 6.80 400,000 profit-maximizing output? 1. 376000 . ua 30,000 Cleat the prof hat Bob's makes, ae oben Ree ee eee ee cee 10.00 200,000 Sel yo.80 275,000 60 20.000 110 225,000 °c Wo 0 nbd Aledo eal Pern 1320 2o0.000 Ieractve. 14.00 175,000250 ” CHAPTER 11 PERFECT COMPETITION ‘The market is perfectly competitive and cach firm has the same cost structure described by the following. table: ‘Average Average Marginal variable. total Output cost cost cost (cos per weet! (euros per CD) 150 6.00 380 1547 200 4.60 7.80 11.80 250 7.00 7.00 11.00 300 7.85 7.10 10.43 350 840 7:20 10.08 400 10.00 7.50 10.00 450 12.40 8.00 10.22 500 20.70 9.00 11.00 ‘There are 1,000 firms in the industry. ‘2 What isthe market price? -b Whatis the industry's output? ‘© Whatis the output produced by each fm? ‘d_ What isthe economic profit made by each fm? {© Do firms enter o exit he industry? Whats the numberof firms in the long run? “The same demand conditions as those in Problem 5 prevail and there ae stil 1,000 firms in the industry, ‘but fixed costs increase by €980. What now are your answers to the questions in problem 5? In problem 5, a fall in the price of digital tapes decreases the demand for CDs permanently and the ‘demand schedule becomes: Price (Quantity demanded {euros per CO) (Ds por week! 295 500,000 413 450,000 5.30 400,000 oy 350,000 7.85 300,000 8a 250,000 10.00 200,000 11.18 10,000 [Rework your answers forthe questions in problem 5 ‘using this demand schedule, In problem 6, a fall in the price of digital tapes decreases the demand for CDs permanently and the demand schedule becomes that given in problem 7. Now rework your answer to the questions in problem 6, 1. Study the Reading berween the Lines on pp. 244-245 and then answer the following questions: ‘a. What are the characteristics of tea production and. tea buyers at auctions that makes the market for tea highly competitive? 'b. Why does the price of tea change so rapidly? Ts such ‘4 change a problem for tea growers? Explain your ‘© What will be the long-run effect of East Asian countries growing more tea? © Who are the winners and who are the losers in the competition between Kenya and East Asian ‘countries for the quality tea export market? 2 What has been the effect of an increase in world population on the wheat market and the individual ‘Wheat farmer? Explain your answer. 3 Why have the prices of pocket calculators and VCRs fallen? What do you think has happened tothe costs and economic profits of the firms that make these products? Use the links on Parkin Interactive to work the fol 1. Read about “grey imports from Japan”. Then answer the following questions: ‘@. What is meant by a “grey impor”? b How do grey imports influence the UK car market inthe short run? © Do you think grey imports will inerease the eff cieney of the UK ear market? Explain your answer, d_ What effect will grey imports have on the UK car ‘market inthe ong fun? 2. Read about the EU decision to inerease the quotas on imports of textiles from China, ‘a Why do you think the European Union limits imports of textiles from China’ 'b Draw-a graph to illustrate the EU market for textiles and the situation facing an individual textile pro- {ducer In those graphs, show the equilibrium price, the equilibrium quantity, the quantity produced by a firm and its profit, © On your graphs, show the effect of increasing the textiles import quota? d Who benefits and who bears costs from the EU quotas on imports of textiles from China?