Joyce owns a gas station and monopolizes gas sales along a remote stretch of road. In February, Joyce stayed open even though she earned negative economic profits. Draw a correctly labeled graph for Joyce’s gas station during February and show each of the following.
The profit-maximizing output and price, labeled QJ and PJ
The average total cost curve, labeled ATC
Deadweight loss, completely shaded
What must have been true for Joyce to continue operating during the month of February even though she earned negative economic profit?
Assume that fixed costs for Joyce’s gas station decrease. Would Joyce’s profit-maximizing quantity increase, decrease, or stay the same in February? Explain.
During the month of July, demand increases so that Joyce now earns a positive economic profit. However, she realizes her profits would have been higher if she had reduced the price of gasoline.
At the quantity sold in July, was marginal revenue greater than, equal to, or less than marginal cost?
Would the price decrease cause quantity demanded to increase, decrease, or stay the same?
Would the price decrease cause the total revenue to increase, decrease, or stay the same? Explain.

In each of the cases below, assume division x has a product that can be sold either to outside customers or to division y of the same company for use in its production process. the managers of the divisions are evaluated based on their divisional profits. case a b division x: capacity in units 200,000 200,000 number of units being sold to outside customers 200,000 160,000 selling price per unit to outside customers $ 90 $ 75 variable costs per unit $ 70 $ 60 fixed costs per unit (based on capacity) $ 13 $ 8 division y: number of units needed for production 40,000 40,000 purchase price per unit now being paid to an outside supplier $ 86 $ 74 required: 1. refer to the data in case a above. assume in this case that $3 per unit in variable selling costs can be avoided on intracompany sales. a. what is the lowest acceptable transfer price from the perspective of the selling division? b. what is the highest acceptable transfer price from the perspective of the buying division? c. what is the range of acceptable transfer prices (if any) between the two divisions? if the managers are free to negotiate and make decisions on their own, will a transfer probably take place?