1) Suppose you have a job analyzing a perfectly competitive market. The aggregate demand is D Q (p)= 72-_ 3 And the cost function for the (identical) firms is C(q)= 6q2+54 (a) Consider first a short scenario, and setup and solve the profit maximization problem over quantity. Write the quantity an individual firm will produce as a function of the sale price. (b) Solve for the price, quantity, and profits for each individual firm and then also for aggregate quantity in equilibrium when the number of firms is fixed at N = 32 (show your work) (c) Will these firms shutdown in the short run? Explain.

1) Suppose you have a job analyzing a perfectly competitive market. The aggregate demand is D Q (p)= 72-_ 3 And the cost function for the (identical) firms is C(q)= 6q2+54 (a) Consider first a short scenario, and setup and solve the profit maximization problem over quantity. Write the quantity an individual firm will produce as a function of the sale price. (b) Solve for the price, quantity, and profits for each individual firm and then also for aggregate quantity in equilibrium when the number of firms is fixed at N = 32 (show your work) (c) Will these firms shutdown in the short run? Explain.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter2: Mathematics For Microeconomics

Section: Chapter Questions

Problem 2.2P

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