Assume a competitive industry is initially at its long-run equilibrium, given the inverse market demand and supply functions: P = 25000 − 0.2Qd and P = 5000 + 0.3Qs If all current firms in this market have identical cost structures and produce 50 units at their break-even point: Now, assume that the inverse demand for this product increases to P = 35000 − 0.2Qd, which leads to an entry of and additional number of firms whose cost structures are also identical to those who existed in the market before the increase in the demand. If the new long-run equilibrium price after both changes is 20000 cents: a- How many new firms entered this market? b- What is the value of the elasticity of supply at long-run market equilibrium? c- Draw a fully-labeled graph that demonstrated the above changes at the firm and market levels, highlighting the long-run industry supply curve

Assume a competitive industry is initially at its long-run equilibrium, given the inverse market demand and supply functions: P = 25000 − 0.2Qd and P = 5000 + 0.3Qs If all current firms in this market have identical cost structures and produce 50 units at their break-even point: Now, assume that the inverse demand for this product increases to P = 35000 − 0.2Qd, which leads to an entry of and additional number of firms whose cost structures are also identical to those who existed in the market before the increase in the demand. If the new long-run equilibrium price after both changes is 20000 cents: a- How many new firms entered this market? b- What is the value of the elasticity of supply at long-run market equilibrium? c- Draw a fully-labeled graph that demonstrated the above changes at the firm and market levels, highlighting the long-run industry supply curve

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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Assume a competitive industry is initially at its long-run equilibrium, given the inverse market demand and supply functions: P = 25000 − 0.2Qd and P = 5000 + 0.3Qs If all current firms in this market have identical cost structures and produce 50 units at their break-even point: 1- How many firms operate in this market at this point? 2- What is the profit maximizing quantity produced by each competitive firm? Now, assume that the inverse demand for this product increases to P = 35000 − 0.2Qd, which leads to an entry of and additional number of firms whose cost structures are also identical to those who existed in the market before the increase in the demand. If the new long-run equilibrium price after both changes is 20000 cents: 3- How many new firms entered this market? 4- What is the value of the elasticity of supply at long-run market equilibrium? 5- Draw a fully-labeled graph that demonstrated the above changes at the firm and market levels, highlighting the long-run industry…
Assume a competitive industry is initially at its long-run equilibrium, given the inverse market demand and supply functions: P = 25000 − 0.2Qd and P = 5000 + 0.3Qs If all current firms in this market have identical cost structures and produce 50 units at their break-even point: 1- How many firms operate in this market at this point? 2- What is the profit maximizing quantity produced by each competitive firm?
Assume a competitive industry is initially at its long-run equilibrium, given the inverse market demand and supply functions:P=25000−0.2Qd and p=5000+0.3QsIf all current firms in this market have identical cost structures and produce 50 units at their break-even point:a) How many firms operate in this market at this point? b) What is the profit maximizing quantity produced by each competitive fir
Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be Multiple Choice the same as the initial equilibrium price, but the new industry output will be greater than the original output. greater than the initial price, and the new industry output will be greater than the original output. less than the initial price, but the new industry output will be greater than the original output. the same as the initial equilibrium price, and the industry output will remain unchanged.
Industry X has a market demand curve given by the equation P = 100 – Q/100, where P is the market price, and Q is industry-wide output.100 perfectly competitive firms currently operate in industry X. Each of these firms has a total cost function given by TC = 100 + 10q + q2, where q is the output of the individual firm, and thus MC = 10 + 2q. (a) Would any of the firms in industry X ever shut down in the short run? If so, what is the cut-off price required for firms to operate – Shut-down price? (b) What is the market output in the short run? What is the market price? How much do individual firms produce? Do firms earn economic profits? [Hint: you will first need to work out the industry supply curve.] *Note: when finding answers for this question online, they wrote to first find the AVC function for part a but I don't understand how they found that AVC function first- any help would be much appreciated!
Assume a competitive industry is initially at its long-run equilibrium, given the inverse market demand and supply functions:p = 25000 − 0.2qd ??? Qs = 5000 + 0.3qsIf all firm in this market have identical cost structures:a) How many firms operate in this market at this point? b) What is the profit maximizing quantity produced by each competitive firm?
. Suppose a firm operating in a perfectly competitive industry has costs in the short run given by: SRTC = 8 + ½q2 and therefore MC = q. Assuming that the firm is a price-taker operating in a competitive market, derive an expression for the firm’s supply curve, (the profit maximizing output for the firm as a function of the market price, i.e., q S = f(p). Assuming the firm is one of 100 identical firms in the industry, what is the short-run supply curve for the industry, i.e., Q S = f(p)? If demand is given by Q D = 1000 – 100p, what are the short-run equilibrium price, market quantity, and firm quantity? Is this a long-run equilibrium? [Hint: Calculate firm profit in the equilibrium.]
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Suppose a firm operating in a perfectly competitive industry has costs in the short run given by: SRTC = 8 + ½q^2 and therefore MC = q. Assuming that the firm is a price-taker operating in a competitive market, derive an expression for the firm’s supply curve, (the profit maximizing output for the firm as a function of the market price, i.e., q^s = f(p). Assuming the firm is one of 100 identical firms in the industry, what is the short-run supply curve for the industry, i.e., Q^s = f(p)? If demand is given by Q^D = 1000 – 100p, what are the short-run equilibrium price, market quantity, and firm quantity? Is this a long-run equilibrium? [Hint: Calculate firm profit in the equilibrium.]
Given the cost information in the previous question and an industry demand function of Q = 2400 - 5p, how many firms are in this industry in the long-run equilibrium?
Consider a competitive industry with a market demand curve of P = 252 - Q, where P is market price and Q is the quantity demanded in the market. Each firm in the industry has a cost function of TC = 196 + q^2, if q > 0 where q is output of the individual firm (TC = 0 if q = 0). The market is initially in long-run equilibrium. The government decides to regulate the industry by issuing licences to all firms currently in the industry. and not to allow any further entry by other firms without a licence. That is, the number of licences is fixed, and entry requires that an existing licence holder sells their licence to the potential entrant, leaving the number of firms producing in the industry fixed. Subsequent to the introduction of this regulation, the market demand curve shifts to P = 432 - Q. What is the value of the licence?
Suppose you are given the following information about a particular industry Q(d) = 6500 - 100P Market Demand Q(s) = 1200P Market Supply C(q) = 722 + q^2/200 Firm total cost function MC(q) = 2q/200 Firm marginal cost function Assume that all firms in this industry are identical and that the market is characterized as perfect competition. Find the equilibrium price, the equilibrium quantity, the output supplied by the firm, and the profit of each firm. Would you expect to see entry into or exit from the industry in the long run? What effect would this entry or exit have on market equilibrium? What is the lowest price at which each firm would stay and sell its output in the long run? Is profit positive, negative or zero at this price? What is the lowest price at which each firm would sell its output in the short run? Is profit positive, negative, or zero at this price?