A firm in a perfectly competitive industry has fixed costs of FC = 15, marginal costs of MC = 5 + 14q, and average variable costs of AVC = 5 + 7q. (a) What are the firm's variable costs (VC)? (b) What is the firm's total cost function? (0) If the price is $75, how much does the firm supply? (d) Does the firm continue to supply this quantity in the short-run? (e) Suppose there exists a standard market demand function from consumers (downward slopping). Please provide a logical discussion about how the market achieves short-run equilibrium
A firm in a perfectly competitive industry has fixed costs of FC = 15, marginal costs of MC = 5 + 14q, and average variable costs of AVC = 5 + 7q. (a) What are the firm's variable costs (VC)? (b) What is the firm's total cost function? (0) If the price is $75, how much does the firm supply? (d) Does the firm continue to supply this quantity in the short-run? (e) Suppose there exists a standard market demand function from consumers (downward slopping). Please provide a logical discussion about how the market achieves short-run equilibrium
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
Problem 5.7IP
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Question
1. A firm in a
of MC = 5 + 14q, and average variable costs of
(a) What are the firm's variable costs (VC)?
(b) What is the firm's total cost function?
(0) If the price is $75, how much does the firm supply?
(d) Does the firm continue to supply this quantity in the short-run?
(e) Suppose there exists a standard
(downward slopping). Please provide a logical discussion about how the market
achieves short-run equilibrium.
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