PROBLEM (4) The short run market supply for shirts is Qs = 50P – 1000 and the market demand is QD = 2800 – 50P Let a typical firm operating in a perfectly competitive industry has short-run total cost and marginal and MC(q) = 20 + 2q cost curves: TC(q) = 100 + 20q + q² a) Determine the short run market equilibrium price and quantity for this type of shirt. b) Determine how much the typical firm will produce at the equilibrium price you found in (a). c) If all firms had the same cost structure, how many firms should be operating in this industry at the moment?

PROBLEM (4) The short run market supply for shirts is Qs = 50P – 1000 and the market demand is QD = 2800 – 50P Let a typical firm operating in a perfectly competitive industry has short-run total cost and marginal and MC(q) = 20 + 2q cost curves: TC(q) = 100 + 20q + q² a) Determine the short run market equilibrium price and quantity for this type of shirt. b) Determine how much the typical firm will produce at the equilibrium price you found in (a). c) If all firms had the same cost structure, how many firms should be operating in this industry at the moment?

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter11: Price-searcher Markets With High Entry Barriers

Section: Chapter Questions

Problem 14CQ

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PROBLEM (4) The short run market supply for shirts is QS = 50P – 1000 and the market demand isQD = 2800 – 50P Let a typical firm operating in a perfectly competitive industry has short-run total cost and marginal cost curves: TC(q) = 100 + 20q + q2 and MC(q) = 20 + 2q (a) Determine the short run market equilibrium price and quantity for this type of shirt.(b) Determine how much the typical firm will produce at the equilibrium price you found in (a).(c) If all firms had the same cost structure, how many firms should be operating in this industry at the moment? (d) Calculate the profit or loss of each firm at the short-run market equilibrium. If they are making losses, why are they still producing in the short run? In the long run, will there be entry into the market or exit from it?(e) What would the price be in the long run equilibrium, assuming constant cost industry?(f) In the long run equilibrium, how many shirts would each firm produce? What would be a firm’s net profit?(g) How…
(a) At what output is the firm’s profit maximised and How much profit is made at this output? (b) Draw the total profit TΠ curve over the range of output where positive profit is made. (d) How much is total fixed cost, At what output is the price elasticity of demand equal to -1 and At what outputs does the firm break even?
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.
1. A firm in a perfectly competitive industry has fixed costs of FC = 15, marginal costs of MC = 5 + 14g, and average variable costs of AVC = 5 + 7q. (a) What are the firm's variable costs (VC)? (b) What is the firm's total cost function? (c) If the price is $75, how much does the firm supply? (d) Does the firm continue to supply this quantity in the short-run? (e) Suppose there exists a standard market demand function from consumers (downward slopping). Please provide a logical discussion about how the market achieves short-run equilibrium.
Use table to find the required values: Price $32 Quantity 400,000 Explicit costs $3,500,000 Implicit costs $4,100,000 (A) Calculate total revenue. (B) Calculate accounting profit. (C) Calculate economic cost. (D) Calculate economic profit.
The accompanying graph shows the short-run demand and cost situation for a price searcher in a market with low barriers to entry. Price (dollars) 24 10 V ATC The firm will receive $ MR Quantity/time The firm will maximize its profit at a quantity of▼ units. D Options: 6, 8, 9, or 10 After choosing the profit maximizing quantity, the firm will charge a price of in revenue at the profit-maximizing quantity. The total cost of production for this profit-maximizing quantity is $ The maximum profit the firm can earn in this situation is How will the situation change over time? Options: 6,8 10, or 24 per unit for this output. O Profits will attract rival firms into the market until the profit-maximizing price falls to the level of per-unit cost. O The market will adjust until the price charged by this firm no longer exceeds marginal cost at the profit-maximizing quantity. O This market is already in long-run equilibrium, and will not change throughout time. O Losses will induce firms to leave…
Use the following graphs for questions 22 and 23. At what price would a firm exit the market? (a) Relationship of total cost to total variable cost and total fixed cost (b) Relationship of marginal cost to average total cost, average variable cost, and average fixed cost Total Costs (dollars) 700 Cost 150 Per 140 TC Unit 130 TVC (dollars) 120 MC 600 110 100 500 90 80 400 70 60 ATC 300 TFC 50 AVC 40 AFC 200 30 20 TFC 100 10 AFC 0 1 2 3 4 5 6 7 8 9 10 11 12 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of Output Quantity of Output (units per hour) (units per hour) O $20 O $30 $45 $50
The accompanying graph shows the short-run demand and cost situation for a price searcher in a market with low barriers to entry. Price (dollars) 24 10 8 MC 1 I I I I ATC MR 30 ++ II II II 45 50 Quantity/time The firm will maximize its profit at a quantity of D units.
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Problem #1: Assume that the following marginal costs exist in catfish production: 17 Quantity Produced (units per day) Marginal Cost (per unit) 10 11 12 13 14 15 16 $4 6 8 10 12 14 16 18 (a) Graph the MC curve. (b) Use the data on market demand below and graph the demand and MR curves on the same graph. Quantity demanded (units per day) 10 Price (per unit) 11 12 13 14 15 16 17 $25 24 23 22 21 20 19 18 (c) At what rate of output is MR = MC?
(b) You are the CEO for a lightweight compasses manufacturer. The demand function for the lightweight compasses is given by p = 40 – 4q²where q is the number of lightweight compasses produced in millions. It costs the company $15 to make a lightweight compass. (i) Write an equation giving profit as a function of the number of lightweight compasses produced. (ii) At the moment the company produces 2 million lightweight compasses and makes a profit of $18,000,000, but you would like to reduce production. What smaller number of lightweight compasses could the company produce to yield the same profit? Problem з
Based on the table below for a perfectly competitive firm: Quantity Fixed Variable Total Cost Cost Cost Marginal Cost ****: |10 20 200 50 200 100 250 300 5 500 20 1000X **** 30 40 200 300 200 800 (a) Find the marginal cost as X. (b) If the equilibrium price is $20, find the profit maximizing quantity. (c) How much profit will the firm earn?