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Answered: - The cost of producing flat-screen TVs has fallen over the past


The cost of producing flat-screen TVs has fallen over the past decade. Let's consider some implications of this fact.?

A) Draw a supply and demand diagram to show the effect of falling production costs on the price and quantity of flat-screen TVs sold.

B) In your diagram, show what happens to consumer surplus and producer surplus.

C) Suppose the supply of flat-screen TVs is very elastic. Who benefits more from falling production cost- consumers or producers of these TVs


Homework # 3:

 

Tiga ping pong balls is a firm that operates in a competitive market. The ping pong balls sell for $6

 

per package.

 

Output

 

(thousandp

 

ackages)

 


 

Price

 

($/package)

 


 

Total Revenue

 

($000)

 


 

Total Cost

 

($000)

 


 

0

 


 

6

 


 

3.0

 


 

1

 


 

6

 


 

4.0

 


 

2

 


 

6

 


 

4.8

 


 

3

 


 

6

 


 

6.5

 


 

4

 


 

6

 


 

9.3

 


 

5

 


 

6

 


 

14.5

 


 

6

 


 

6

 


 

20.5

 


 

7

 


 

6

 


 

27

 


 

8

 


 

6

 


 

34

 


 

9

 


 

6

 


 

41.7

 


 

10

 


 

6

 


 

Profit

 

($000)

 


 

Marginal

 

Revenue

 


 

Marginal

 

Cost

 


 

($/package)

 


 

($/package)

 


 

50.7

 


 

a. Fill in the blank. At what amount of output does the firm maximize its profit? How much is

 

the profit then?

 


 

b. Suppose the market price increases by $1 (Pnew = $7 per package), how do the above results

 

change?

 


 

Output

 

(thousandp

 

ackages)

 


 

Price

 

($/package)

 


 

Total Revenue

 

($000)

 


 

Total Cost

 

($000)

 


 

0

 


 

7

 


 

3.0

 


 

1

 


 

7

 


 

4.0

 


 

2

 


 

7

 


 

4.8

 


 

3

 


 

7

 


 

6.5

 


 

4

 


 

7

 


 

9.3

 


 

5

 


 

7

 


 

14.5

 


 

6

 


 

7

 


 

20.5

 


 

7

 


 

7

 


 

27

 


 

8

 


 

7

 


 

34

 


 

9

 


 

7

 


 

41.7

 


 

10

 


 

7

 


 

Profit

 

($000)

 


 

Marginal

 

Revenue

 


 

Marginal

 

Cost

 


 

($/package)

 


 

($/package)

 


 

50.7

 


 

c. Discuss how the producers? incentive to produce relates to the market price?

 


 

 


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