2. A profit-maximizing firm in a perfectly competitive industry has costs given by C = 80 + 2Q?, marginal costs given by MC = 4Q, and faces a price of P = 20. a) Find this producer's optimal choice of output, their average cost at this level of output, and how much profit they make. Show your work. b) In the long run, do you predict that the price in this industry will be higher than, lower than, or the same as it is now? Explain your answer with reference to the assumptions of the model of perfect competition.

2. A profit-maximizing firm in a perfectly competitive industry has costs given by C = 80 + 2Q?, marginal costs given by MC = 4Q, and faces a price of P = 20. a) Find this producer's optimal choice of output, their average cost at this level of output, and how much profit they make. Show your work. b) In the long run, do you predict that the price in this industry will be higher than, lower than, or the same as it is now? Explain your answer with reference to the assumptions of the model of perfect competition.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Firms In Competitive Markets

Section: Chapter Questions

Problem 4CQQ

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