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- Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2 Marginal cost: MC = q where q is an individual firms quantity produced. The market demand curve for this product is Demand:QD = 120 P where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market. a. What is each firms fixed cost? What is its variable cost? Give the equation for average total cost. b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity? c Give the equation for each firms supply curve. d. Give the equation for the market supply curve for the short run in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market in the short run? f. In this equilibrium, how much does each firm produce? Calculate each firms profit or loss. Is there incentive for firms to enter or exit? g. In the long run with free entry and exit, what is the equilibrium price and quantity in this market? h. In this long-run equilibrium, how much does each firm produce? How many firms are in the market?5. The market demand for leather handbags is given by the function P = 75 - 1.5Q. P is priceper handbag, and Q is output per time period.The market supply is given as P = 25 + 0.50Q. A typical competitive firm that markets thistype of bag has a marginal cost of production of MC = 2.5 + 10q. [4]a) Calculate the market equilibrium price for the bags as well as the output rate in themarket.b) Calculate how much the typical firm will produce per time period at the equilibriumprice.c) If all firms had the same cost structure, how many firms would compete at theequilibrium price computed in (a) above?Suppose a firm in a competitive industry has the following cost curves: 10 9 8 7 6 5 4 3 2 1 Price + 1 + + + 2 3 4 5 MC ATC AVC P1 P2 P3 P4 + 6 7 8 Quantity Refer to Figure 14-13. If the price is P1 in the short run, what will happen in the long run? Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. Because the price is below the firm's average variable costs, the firms will shut down.
- 2. Suppose that a market consists of 650 idetical fims, all with the same cost curve: TC(q) = 325q² + 0.3. The market demand is given by Qd(p) = 50 – p (a) What is the equilibriun price and quantity? (b) What quantity must each firm produce and sell at equilibrium? (c) Do fims make positive profits in the market equilibrium? (d) Calculate consumers' surplus, producers' surplus and total surplus. (e) The government imposes a tax of 12 per unit of the product on the suppliers. What will be the new equilibrium price and quantity? (f) Do firms make positive profits at market equilibrium? (g) What will be the new consumes surplus, produces surplus and total surplus? (h) Calculate the value of the DWL imposed by the tax.Question 14 Questions 14-18 refer to Figure 5-1 below. Suppose a firm operating in a perfectly competitive market has the following cost curves: Figure 5-1 MC ATC P4 P3 P2 2 P1 Price AVC Q102 03 04 Q5 Quantity Refer to Figure 5-1. When price rises from P2 to P3, the firm finds that... marginal cost exceeds marginal revenue at a production level of Q2. if it produces at output level Q3 it will earn a positive profit. O expanding output to Q4 would leave the firm with losses. it could increase profits by lowering output from Q3 to Q2.Suppose that a perfectly competitive firm faces a market price of $7 per unit, and at this price the upward-sloping portion of the firm's marginal cost curve crosses its marginal revenue curveat an outpuut level of 1,400 units. If the firsm produces 1,400 units, it's average variable costs equal $6.50 per unit, and its average fixed costs equal $0.80 per unit. What is the firm's maximizing (or loss-minimizing output level? What is the amount of it's economic profits (or losses) at this output level?
- E4 A Firm ís short-run total cost function is: T C = 4q2 - 2q + 7 The Firm sells in a perfectly competitive market and the ruling price is p = 50 (a) Find the output level that maximizes profits. Show you have a maximum. (b) Find the output level that minimizes average cost, AC. Show you have a minimum. (c) Sketch the graphs of total cost and total revenue with the same axes (d) Sketch the graph of the profit function.Price (S) 24- 21- 18- 15- 12- 9- 6- 3- 0 MG OC. 800 OD. 1,200 6 8 10 12 14 16 18 20 Quantity (100s) (Figure 7) The graph shows a firm's marginal cost curve. This firm operates in a perfectly competitive industry with market demand and supply curves given by Qd = 100-8 P and QS = -20+2 P, where Q is measured in millions of units. Based on the figure, how many units of output will the firm produce at the equilibrium price? OA. 400 OB. 1,100only typed answer Assume a competitive firm faces a market price of $120, a cost curve of: C = 13q3 + 20q + 500, and a marginal cost of: MC = q2 +20. What is the firm's profit maximizing output level? ?? Units (round your answer to two decimal places) What is the firm's profit maximizing price? ??? (round to the nearest penny) What is the firm's profit? ??? (round to the nearest npenny) In the short-run, this firm should ?? produce or shut down??
- Q23 Suppose a perfectly competitive firm is currently operating with the following information: Output = 1500 tonnesAverage total cost = $627 per tonneAverage variable cost = $614 per tonneMarginal revenue = $620 per tonneMarginal cost = $620 per tonneAt the current level of output, this firm is _____ profit and is an earning economic profit of _____. a. Maximising; -$10500. b. Not maximising; -$10500. c. Maximising; $10500. d. Maximising; $9000. e. Not maximising; -$9000.2) A perfectly competitive market has demand given by Qp market, and cach firm has a different cost structure as shown below: 4850-70P.There are four firms in this TC (q) = 5000 + 4q + 0.02q? MC(q) = 4+ 0.04q Client 9 & Co. TC(q) = ? MC(q) = 1+0.05q BTVS Inc 6000 +q + 0.025q TC(q) = 5000 + 2q + 0.02q? MC(q) = 2+ 0.04q The Fred Firm TC (q) = 15000 + 5q + 0.005q2 MC(q) = 5+0.01q OTT (a) What is the market price and market quantity? Hint: Start by determining the individual supply for each firm, and then add them to get the market supply (b) How many units does cach firm produce, and how much profit does each firm make? (c) In the long-run competitive equilibrium, what is the market price and market quantity? (d) In the long-run competitive equilibrium, how many units docs cach firm produce, and how much profit docs cach firm make?The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a purely competitive firm that produces novelty ear buds. Assume the market for novelty ear buds is a competitive market and that the price of ear buds is $6.00 per pair. Buddies Production Costs MC ($) Quantity of Ear Buds 5 10 15 20 25 30 35 40 2.00 2.45 3.55 4.00 5.50 5.98 8.52 pairs ATC ($) 2.00 2.00 2.15 2.50 2.80 3.25 3.64 4.25 Check my work Instructions: In part a, enter your answer as the closest given whole number. In parts b-d, round your answers to two decimal places. a. If Buddies wants to maximize profits, how many pairs of ear buds should it produce each week? b. At the profit-maximizing quantity, what is the total cost of producing ear buds? c. If the market price for ear buds is $6 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what will Buddies profit or loss be per week? d. Now assume the market price is $5.50 per pair, and Buddies produces the…
