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Strategic Economic Analysis for Profit Maximization

This chapter discusses calculating input costs, finding profit-maximizing input levels, equilibrium prices for a monopsonist, competitive markets, and monopolist strategies in response to market interventions. Key concepts such as marginal input costs, monopolistic exploitation, and pricing strategies are explored in detail.

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Strategic Economic Analysis for Profit Maximization

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  1. Chapter 9 Supplemental Questions

  2. Question 1. A. Calculate the total input cost and the marginal input cost. B. If the marginal value or marginal revenue products were 4, what would be the profit maximizing level of input?

  3. MIC 8 $/unit 5 3 10 15 Quantity per unit of time Question 2. A. Find the equilibrium price and quantity for a monopsonist in the graph below. B. Find the equilibrium price and quantity under perfect competition in the graph below. C. What is the magnitude of monopsonistic exploitation? Supply of Input MVP or MRP

  4. MC $/unit ATC MR D Quantity per unit of time Question 3. On the following graph, show the effect of a lump-sum tax on a monopolist.

  5. Question 4. Using the graph below, answer questions a through d. A. What are the profit-maximizing price and quantity levels for the monopolist? B. Calculate profit. C. Suppose the government imposes a price ceiling of $40. Now what is the optimal price and quantity combination? D. Calculate the new level of profit.

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