2) Consider the cost functions of a two firms that are producing the same commodity are C1 = 3q1^2 + 50q1 C2 = 2q2^2 + 20q2 - 4q1q2 Determine the output levels of the firms
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- Suppose that each firm in a competitive industry has thefollowing costs: Total cost: TC=50 + 1/2q^2 Marginal cost: MC=q where q is an individual firm’s quantity produced. The marketdemand 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. 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 curvefor q from 5 to 15. At what quantity is average total cost curve atits minimum? What us marginal cost and average total cost at thisquantity? c. Give the equation each firm’s supply curve. d. Give the equation for the market supply curve for the shortrun in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market inthe short run? f. In this equilibrium, how much does each firm produce?Calculate each firm’s profit or loss. Is there incentive for…You’ve been given a firm’s production and cost functions:p = 132 −2qMC = 12 + 4q(a) Assume this firm is in a perfectly competitive market. Calculate the equilibrium price andquantity.(b) What is the firm’s profit here?(c) Assume this firm is in a monopoly market. Calculate the equilibrium price and quantity.(d) What is the firm’s profit here?(e) Give an example of a perfectly competitive agricultural market, and give an example of amonopoly agricultural market.Suppose you are the economic adviser ofa company producing three brands of mobile pnones;Nokia 10, Samsung X and iPhone 7. Suppose further that, your company currently sells 120units of iPhone Z at e800 per unit, 150 units of Samsung X at e800 per unit and 200 units ofNokia 10 at e100 per unit, but in a bid to maximize profit, the company's managing directorproposes an increase in price of Samsung X from e800 to e1000 per unit for which quantitydemanded is anticipated to fall from 150 to 100 units; iPhone Z from e800 to e 1200 per unitfor which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from100 to 200 per unit for which quantity demanded is expected to fall from 200 to 100 unitsUsing the mid-polint formula. compute the price elasticity of demand for each brand.From your answer in i, what is the type and economic interpretatiom of each brand'sii.value of elasticity.
- 1. Mzanzi-Ndizvo (Pty) is a vaccine manufacturing company that has the following costs ofproduction. Cost of capital is R50 000, labour cost is R30 000, and the total cost the firm is willing to pay is R300,000. Identify the type of this production function and Illustrate it with a 2D graph. 2. If the demand and supply curve for cell phones is given by: D = 80 - 4P, S = 40 + 6P In a market with a price of P for smartphones, compute the number of phones that would be bought and sold at equilibrium.An economist was trying to understand the relation between price, Marginal Revenueand Marginal cost in Monopoly and Perfect Competition. Determine equilibrium priceand output in the long run under Monopoly and Perfect Competition if the marketdemand curve is given as QD=500-2P and Marginal cost is Rs 50. Also comment onthe values obtained in the case of Monopoly and Perfect CompetitionSuppose that fixed costs for a firm in the automobile industry (start-up costs of facto-ries, capital equipment, and so on) are $5 billion and that variable costs are equal to$17,000 per finished automobile. Because more firms increase competition in themarket, the market price falls as more firms enter an automobile market, or specifi-cally, P = 17,000 + (150/n), where n represents the number of firms in a market.Assume that the initial size of the U.S, and the European automobile markets are 300million and 533 million people, respectively.a. Calculate the equilibrium number of firms in the U.S. and European automobilemarkets without trade.b. What is the equilibrium price of automobiles in the United States and Europe if theautomobile industry is closed to foreign trade?c. Now suppose that the United States decides on free trade in automobiles withEurope. The trade agreement with the Europeans adds 533 million consumers tothe automobile market, in addition to the 300 million in the…
- usiness EconomicsQ&A LibraryTwo firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in the industry that manufacture this product. Their marginal cost (MC) is equal to their average cost (AC) and it is constant at MC = AC = X, for both firms. Market demand is given as Q = Y – 2P (where P = price and Q = quantity). Select any value for X between [21 – 69] and any value for Y between [501 – 999]. Using this information, calculate the Industry Price, Industry Output, Industry Profit, Consumer Surplus and Deadweight Loss under each of the following models: (a) Cournot Model Two firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in…3. Suppose that fixed costs for a firm in the automobile industry (start-up costs of facto-ries, capital equipment, and so on) are $5 billion and that variable costs are equal to$17,000 per finished automobile. Because more firms increase competition in themarket, the market price falls as more firms enter an automobile market, or specifi-cally, P = 17,000 + (150/n), where n represents the number of firms in a market.Assume that the initial size of the U.S, and the European automobile markets are 300million and 533 million people, respectively.a. Calculate the equilibrium number of firms in the U.S. and European automobilemarkets without trade.b. What is the equilibrium price of automobiles in the United States and Europe if theautomobile industry is closed to foreign trade?c. Now suppose that the United States decides on free trade in automobiles withEurope. The trade agreement with the Europeans adds 533 million consumers tothe automobile market, in addition to the 300 million in the…Suppose that each firm in a competitive industry has the following costs: Totalcost:TC=50+1/2q2 Marginalcost: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. 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 qfrom 5 to 15. Atwhat quantity is average-total-cost curve at its minimum? What is marginal cost and averagetotal 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 there incentive for firms to…
- 5. The market demand for leather handbags is given by the function P = 75 - 1.5Q. P is priceper handbag, and Q is output per time period.The market supply is given as P = 25 + 0.50Q. A typical competitive firm that markets thistype of bag has a marginal cost of production of MC = 2.5 + 10q. [4]a) Calculate the market equilibrium price for the bags as well as the output rate in themarket.b) Calculate how much the typical firm will produce per time period at the equilibriumprice.c) If all firms had the same cost structure, how many firms would compete at theequilibrium price computed in (a) above?Suppose that YouYeet is one of over a dozen competitive firms in the Oviedo area that offers moving truck rentals. Based on the preceding graph showing the weekly market demand and supply curves, the price YouYeet must take as given is . Fill in the price and the total, marginal, and average revenue YouYeet earns when it rents 0, 1, 2, or 3 trucks during move-in week. Quantity Price Total Revenue Marginal Revenue Average Revenue (Trucks) (Dollars per truck) (Dollars) (Dollars) (Dollars per truck) 0 0 – 1 2 3 The demand curve faced by YouYeet is identical to which of its other curves? Check all that apply. Supply curve Marginal revenue curve Average revenue curve Marginal cost curveY6 Suppose that a market consists of 300 identical firms, all with the same cost curve: TC(4) = 0.1 + 150g?. The market demand is given by Qd(p) = 60 - p (a) What is the equilibrium price and quantity? (b) What quantity must each firm produce and sell at equilibrium? (c) Do firms make positive profits in the market equilibrium? (d) Calculate consumers' surplus, producers' surplus and total surplus.