3. Suppose that each firm in a competitive industry has the following costs: Total Cost: TC = 50+ ¹/29² Marginal Cost: MC = q where q is an individual firm's 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) e f) What is each firm's What is the equilibrium price and quantity for In this equilibrium, how much does each firm produce? Calculate each firm's profit or loss. Do firms have an incentive 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?

3. Suppose that each firm in a competitive industry has the following costs: Total Cost: TC = 50+ ¹/29² Marginal Cost: MC = q where q is an individual firm's 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) e f) What is each firm's What is the equilibrium price and quantity for In this equilibrium, how much does each firm produce? Calculate each firm's profit or loss. Do firms have an incentive 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?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter8: Perefect Competition

Section: Chapter Questions

Problem 5SQP

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Firms ill a perfectly competitive market are said to be price takers that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?
A market in perfect competition is in long-run equilibrium. What happens to the market if labor unions are able to increase wages for workers?
Consider the competitive market for sports jackets. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 72 16 AVC 16 24 40 QUANTITY (Thousards of jaats) For each price in the following tabie, use the graph to determine the number of jackets this firm would produce in arder to maximize its profie. Assume that when the price is exacty equal to the average variabie cost, the firm is indifferent between producing zero jackets and the proft-maximizing quandity. Also, indicate whether the fiem wil produce, shut down, or be indiferent between the two in the short run. Lastiy, determine whether e w make a prafit, suffer a loss, ar break even at each price. Price Quantity (Dollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? 4 12 36 48 60
An industry currently has 100 firms, each of whichhas fixed cost of $16 and average variable cost asfollows:Quantity Average Variable Cost1 $12 23 34 45 56 6a. Compute a firm’s marginal cost and average totalcost for each quantity from 1 to 6.b. The equilibrium price is currently $10. How muchdoes each firm produce? What is the total quantitysupplied in the market?c. In the long run, firms can enter and exit themarket, and all entrants have the same costs asabove. As this market makes the transition to itslong-run equilibrium, will the price rise or fall?Will the quantity demanded rise or fall? Will thequantity supplied by each firm rise or fall? Explainyour answers.d. Graph the long-run supply curve for this market,with specific numbers on the axes as relevant.
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4. Profit maximization in the cost-curve diagram All- Consider a perfectly competitive market for shirts. The following graph shows the daily cost curves of a firm operating in this market. PRICE Dlars per sht 20 16 12 12 Price (P) 56 34 AD 12 LE OUTPUT(Theunts of art! In the short run, at a market price of 31 per shirt, this firm will choose to produce 12 18 ME ATC AVC Quantity (Q) Pr On the previous graph, use the blue rectangle (dinde symbols) to shade the area representing the firm's economic profit or loss if the market price is $18 and the firm chooses to produce the quantity you already selected. Tool tip: Mouse over the shaded region on the graph to see its area. The area of this rectangle indicates that the firm would have Chow Al For each price in the following table, calculate the firm's optimal quantity of units produced and determine the economic profit or loss if it produces at that quantity. Use the data from the previous graph to identify its total variable cost. Assume…
Karim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Karim initially produced five trucks, but then decided to increase production to six trucks. The following graph gives the demand curve faced by Karim's HookNLadder. As the graph shows, in order to sell the additional fire truck, Karim must lower the price from $60,000 to $40,000 per truck. Notice that Karim gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial five engines because they are all sold at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $40,000 rather than $60,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $40,000. PRICE (Thousands of dollars per fire engine) A 82 8288 289 RO 220 200 100 100 140 120 100 Demand 3 A A A ΔΔ 0 5…