Answered: 1.- A company that works in a perfectly…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Firms In Competitive Markets

Section: Chapter Questions

Problem 1CQQ

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1.- A company that works in a perfectly competitive market has a total cost function:

TC = Q³- 36Q² + 540Q + 600

The supply and demand functions in that market are:

Q_S = 5P -500

Q_d = 4,000 -10P

a) How much should you produce to maximize your profits?

b) Find what benefit you will get

c) Calculate the closing point for the company

d) Represent graphically the market equilibrium and that of the company, including the closing point

e) Locate the rectangle that represents profits on the company's equilibrium graph. Calculate your área considering the values taken by the base and the height. Validate that it reaches the same result (or very close) to the one obtained in part b).

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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