Suppose that a perfectly competitive industry consists of 240 firms and fixed cost of an individual firm is 384 half of which is a sunk fixed cost while the average variable cost is 12q. Market demand is given by Q-1440-10P. Find the equilibrium output and profit, respectively
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- A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new process lowers the firm’saverage cost, meaning that this firm alone (although still aprice taker) can earn real economic profits in the long run. a. If the market price is $20 per widget and the firm’s marginalcost is given by MC=0.4q , where q is the dailywidget production for the firm, how many widgets willthe firm produce? b. Suppose a government study has found that the firm’snew process is polluting the air and estimates the socialmarginal cost of widget production by this firm to be. If the market price is still $20, what is thesocially optimal level of production for the firm? Whatshould be the rate of a government-imposed excise tax tobring about this optimal level of production? c. Graph your results.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 Refer to the table below, which presents a cost schedule for a perfectly competitive firm. Quantity 10 11 12 13 14 15 16 FI ( If the price that the firm charges for its output is $9, how many units will this firm produce? 11 2 16 S 14 0 W F2 X = 3 20, E D F3 JAN 5 $ 4 888 R F F4 % 5 30 T F5 G ^ 6 F6 Y Total cost ($) 13 H 25 36 46 MacBook Air & 7 55 63 70 A F7 U tv NA * 8 J ➤ll FB ➤➤ ( 9 D 1 F9 O -0 O W F10 K L Aa P 4) zoom F11 + { [ Next SA ) F12 11 ( M htm delete
- Perfect competition is an economic term that refers to a theoretical market structure in which all suppliers are equal and overall supply and demand are in equilibrium. Figure 23. 1 shows the price, marginal cost and average cost curves facing a perfectly competitive firm in the short run. Figure 23.1 Cost, pnce (Rand) B. R800 C. R960 20 D. R720 200 60 80 Output per day 100 MC AC What is the total revenue of the profit-maximising firm in the short run? A. R2 000 Price AVC @ K4. Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 500 + 0.5q Marginal cost: MC = q Where q is an individual firm's quantity produced. The market demand curve for this product is Demand: Q" = 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 firm's 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 firm's 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 firm's profit or loss. Is…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.
- The following graph shows the marginal cost curve for Oiram-46, a competitive firm producing magic hats. Suppose that currently, the prevailing market price is $1.50 per magic hat. On the following graph, use the blue points (circle symbol) to plot Oiram-46's price line. Then use the grey points (star symbol) to indicate the profit maximizing quantity of output produced by Oiram-46. TOTAL COST (Dollars) he 12 11 10 a 8 N 3 2 1 0 + Oiram-46 7 0 MC + H 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 QUANTITY (Magic hats per week) Based on the graph, Oiram-46's profit-maximizing quantity is Demand Profit maximizing quantity ? magic hats, average revenue is $ and marginal revenue isQUESTION 3 PRICE 20 18 MC 16 14 12 10 8 7 6 ATC 42 + 1 2 3 4 5 6 7 8 9 10 QUANTITY If the market price is $10, what is the competitive firm's short run economic profit? $ As a result, the number of firms in the industry would In the long run, price will equal $ and the firm will produce units of output. Long run profits for a comptetive firm will be $and cost 20 15 14 11 MC ATC 750 1.100 1.350 1,800 AVC MR Quantity Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. Refer to Figure 12-5. If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens in the diagram above? None of the curves shifts; only the fixed cost curve, which is not shown here, is affected. All the cost curves shift upward. Only the average variable cost and average total cost curves shift upward: marginal cost is not affected. Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected.
