1. Perfect CompetitionThe city of Econtown is home to 100 small, independent lawn service companies....

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1. Perfect CompetitionThe city of Econtown is home to 100 small, independent lawn service companies. Each company takes the price of mowing lawns as given and each has a cost structure (lawns mowed per day) that is shown in the table below.a. Draw the Marginal Cost graph on the axes shown on the next page. Label the graph MC. Label the ‘shutdown price’ and the ‘eakeven price’ on the graph. . OUTPUT CHOICE RULE: Suppose the market price is $47.50. What is the company’s profit-maximizing output at that price?    Q= ___________c. MINIMUM PROFIT RULE: Will the company operate at that profit maximizing price and quantity in the short run? If so, why? If not, why not?d. What will be the firm’s profit at the profit-maximizing quantity and price? Q= ______P= ________e. How many lawns will be mowed per day across all firms in the industry and what will be their total profit?Equil market number of lawns _______Profit across all firms ______________ f. What will the firm do if the price falls to $32.50? Why?g. What will the firm do if the price falls to $20.00? Why?h. What part of the firm’s MC curve represents the supply curve of the firm?2. MonopolyIn a monopoly market, demand is represented by P=1000-Q. The firm’s cost structure exhibits constant economies of scale (constant returns to scale) with the long run marginal cost and long run average cost equal to $400. a. What is the equation for the firm’s Marginal Revenue (MR) curve? [HINT: If demand is linear, the MR is also linear with the same vertical intercept and twice the slope.]. On the axes below, draw a graph showing the market demand curve, the marginal revenue curve of the monopolist, and the LRAC. c. What is the firm’s profit maximizing output?  Qm=_____________d. What price will the firm charge? Pm = ______________e. Now suppose the government eaks up the monopoly into numerous independent perfectly competitive firms. What will be the equiliium price and quantity under perfect competition?Pc= ____________  Qc=______________ Which outcome is better for consumers: monopoly or perfect competition? Why? 3.    Consumer Price IndexStudents at CSULB live a frugal existence, living in an apartment, eating frozen meals, and talking on the phone when they are not studying. The table below shows the expenditures of a student in 2015 and one in 2020.a.    What is the total expenditure associated with the market basket in 2015?.    What is the total expenditure associated with the market basket in 2020?c.    The base year for expenditures is 2010, at which time the market basket cost $1,000. Compute the following:o    Price index in 2010: ___________o    Price index in 2015: ___________o    Price index in 2020: ___________d.    How does the expenditure in 2020 compare with that of the base year?e.    What is the rate of inflation between 2015 and 2020?    Econ 300 Homework 4.docx/Page 1QFCVCTCAFCAVCATCMC0150.00$  -$ XXXXXXXXXX$  n/a-$ XXXXXXXXXXn/a1150.00$  47.50$ XXXXXXXXXX$ XXXXXXXXXX$  47.50$ XXXXXXXXXX$  47.50$    2150.00$  85.00$ XXXXXXXXXX$  75.00$ XXXXXXXXXX$ XXXXXXXXXX$  37.50$    3150.00$ XXXXXXXXXX$ XXXXXXXXXX$  50.00$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$    4150.00$ XXXXXXXXXX$ XXXXXXXXXX$  37.50$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$    5150.00$ XXXXXXXXXX$ XXXXXXXXXX$  30.00$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$    6150.00$ XXXXXXXXXX$ XXXXXXXXXX$  25.00$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$    7150.00$ XXXXXXXXXX$ XXXXXXXXXX$  21.43$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$    8150.00$ XXXXXXXXXX$ XXXXXXXXXX$  18.75$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$    9150.00$ XXXXXXXXXX$ XXXXXXXXXX$  16.67$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$     XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$  15.00$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$     XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$  13.64$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$     XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$  12.50$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$     XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$  11.54$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$     XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$  10.71$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$     XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$  10.00$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$   XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$  9.38$ XXXXXXXXXX$ XXXXXXXXXX$ XXXXXXXXXX$  ItemUnits XXXXXXXXXXRent1$1,000$1,200Frozen meals60$3$3Phone service110060EXPENDITURES PER MONTHPrice per Unit

Komalavalli · Accepted Answer

1. Perfect Competition
a)
Break-even point is at price $39 and quantity 11 where ATC equals MC curve. Shutdown point is at price $27.5 and quantity 10 where AVC equals MC curve.
b) At price $47.5
Q= 12
c)
In perfect competition market firms in short run will experience profit because price they charge equals marginal revenue which is higher the Average total cost. But in long they earn zero profit.
d)
Q= 12 P= 47.5, profit = TR –TC
TR = 12*47.5  = 570
TC = 480
Profit = 570 – 480
Profit = 90
e)
Equil market number of lawns 1200
Profit across all firms 9000
f)
If price falls to $32.5 the quantity falls , and there will be loss of $75, so the firms which cannot recover the loss will exit the market or shutdown the production.
g)
if the price falls to $20.00 the quantity falls , and there will be loss of $193, so the firms which cannot recover the loss will exit the market.
h)
Question 2:

1. Perfect Competition The city of Econtown is home to 100 small, independent lawn service companies. Each company takes the price of mowing lawns as given and each has a cost structure (lawns mowed...

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