Hi I need the answer to C and D 3. A perfectly competitive individual firm operates in a constant cost industry and produces alevel of output q. Suppose that TC= ((1/2)*q?) + 5,000 and MC = q.a. What question does the supply curve answer? Derive the individual firm supply curve.b. Does the Law of Supply hold for the individual firm supply curve you derived in part (a)?Explain.c. Derive the ATC curve as a function of q. Sketch the ATC curve and the MC curve on thesame graph.d. Suppose the market price is P = 125. In the short run, does the firm earn a positive profit ornot? How do you know?e. Suppose the market price is currently P = 125. In the long run, will firms enter or exit theindustry? How do you know?f. Predict what will happen to the market price as a result of your answer to part (e). Use agraph.g. When the market price changes by a small amount as you describe in part (f), what willhappen to the individual firm quantity? Explain using a graph.h. Two market experts comment on your work in parts (e) through (g).Market Expert 1: "I predict the total amount of output will be larger. When there is a greaternumber of firms, more firms produce more output, so the total amount of output will be larger."Market Expert 2: “But wait! Each individual firm produces less output. I predict the totalamount of output in the industry will actually be smaller."Who is right? Explain how you know.

Answer: (c). ATC=TCqATC=12×q2+5,000qATC=12q+5,000qATC=q2+5,000q Graphical presentation of ATC and…

3. A perfectly competitive individual firm operates in a constant cost industry and produces a level of output q. Suppose that TC=((1/2)*q?) + 5,000 and MC = q. a. What question does the supply curve answer? Derive the individual firm supply curve. b. Does the Law of Supply hold for the individual firm supply curve you derived in part (a)? Explain. c. Derive the ATC curve as a function of q. Sketch the ATC curve and the MC curve on the same graph. d. Suppose the market price is P = 125. In the short run, does the firm earn a positive profit or not? How do you know? e. Suppose the market price is currently P = 125. In the long run, will firms enter or exit the industry? How do f. Predict what will happen to the market price as a result of your answer to part (e). Use a you know? graph.

3. A perfectly competitive individual firm operates in a constant cost industry and produces a level of output q. Suppose that TC=((1/2)*q?) + 5,000 and MC = q. a. What question does the supply curve answer? Derive the individual firm supply curve. b. Does the Law of Supply hold for the individual firm supply curve you derived in part (a)? Explain. c. Derive the ATC curve as a function of q. Sketch the ATC curve and the MC curve on the same graph. d. Suppose the market price is P = 125. In the short run, does the firm earn a positive profit or not? How do you know? e. Suppose the market price is currently P = 125. In the long run, will firms enter or exit the industry? How do f. Predict what will happen to the market price as a result of your answer to part (e). Use a you know? graph.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.4P

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