Consider a perfectly competitive market with identical firms. Each firm faces following average variable cost (AVC) function: 1 AVC(Q) = (Q- 40)2 + 25 40 If each firm's marginal revenue is equal to its marginal cost when (Q,P) = (40,20), what should happen to long-run prices? O A. Rise B. Stay the same C. Fall This happens because firms A. are earning positive short-run profit B. are breaking even C. are earning short-run economic loss DOO
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- E3 Consider a perfectly competitive firm in a short run scenario. Its total cost function is TC(q)= 4q^2 + 8. The market demand function is Q(p) = 800 - 15p, and there are 40 identical firms in the market. A. What is a firm's short-run supply function? Will it ever decide to shut down? Explain. And what is the market supply function? B. Suppose there are 40 identical firms in the market. What is the equilibrium price, p*? What is the equilibrium quantity supplied by each firm, q*? What is each firm's equilibrium profit? Will there be more entry into the market? Why? C. Repeat b, but with 80 firms this time. Label your results with superscript ** D. Repeat part b, but with 280 identical firms now. Label your results by superscript ***. Part E. Compare your results in parts b - d. Explain why the increase in the number of firms affects the results in that manner. What should happen to profit eventually as the number of firms keeps increasing? And when this happens to profit,…A firm in a perfectly competitive industry has fixed costs of FC = 3 and average variable costs of AVC = 2 + 8q. a) What are the firm’s variable costs (VC)? b) What is the firm’s total cost function? c) If the price is $18, 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 sloping). Please provide logical discussion about how the market achieves short-run equilibrium. f) Suppose the market demand was given by Qd(p) = 50 – p. Suppose further that a sales tax of £1 per unit is imposed in the market. Calculate the deadweight loss resulting from this tax. Assume the market consists of 100 firms with identical cost functions.The market determined price in a perfectly competitive industry is P = Rs. 10. Suppose that the total cost equation of an individual firm in the industry is given by the expressionTC 1000+2Q+0.01Q2a) What is the firm’s profit-maximizing output level and profit? Is this profit normal profit or supper normal profit? Justify your answerb) At profit maximizing level what is firm total cost, total revenue and marginal costc) Why does a competitive firm is considered as a price taker and Monopoly firm as a price maker.
- 1. A firm in a perfectly competitive industry has fixed costs of FC = 15, marginal costsof 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 marketachieves short-run equilibrium.Suppose that a perfectly competitive firm faces a market price of $7 per unit, and at this price the upward-sloping portion of the firm's marginal cost curve crosses its marginal revenue curveat an outpuut level of 1,400 units. If the firsm produces 1,400 units, it's average variable costs equal $6.50 per unit, and its average fixed costs equal $0.80 per unit. What is the firm's maximizing (or loss-minimizing output level? What is the amount of it's economic profits (or losses) at this output level?The market determined price in a perfectly competitive industry is P = Rs. 10. Suppose that the total cost equation of an individual firm in the industry is given by the expressionTC 1000+2Q+0.01Q2a) What is the firm’s profit-maximizing output level and profit? Is this profit normal profit or supper normal profit? Justify your answerb) At profit maximizing level what is firm total cost, total revenue and marginal cost c) Why does a competitive firm is considered as a price taker and Monopoly firm as a price maker
- 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? (c) 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.For an individual firm in a perfectly competitive market, let its cost function be c(y) = 8y² + 5y + 6. a) Determine the firm’s marginal cost, average total cost, average fixed cost, and average variable cost in terms of the market price, p. Answers should not be in terms of quantity y. b) What is the firm’s short-run shutdown condition? c) Find the firm’s short-run shutdown price pˆ. That is, if the market price falls below pˆ, the firm will shutdown.Q -1: For an individual firm in a perfectly competitive market, let its cost function bec(y) = 8y2 + 5y + 6.a) Determine the firm’s marginal cost, average total cost, average fixed cost, and average variable cost in terms of the market price, p. Answers should not be in terms of quantity y.b) What is the firm’s short-run shutdown condition?c) Find the firm’s short-run shutdown price ˆp. That is, if the market price falls below ˆp, the firm will shutdown.
- If price is greater than average variable cost and less than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will: shut down production. O produce at an economic profit. O produce at an economic loss. O produce more than the profit-maximizing quantity.Assume that there are 100 identical company in the perfectly competitive cabbage industry. Each firmhas a short-run total cost curve given by ST C = 0.5Q2 − 10Q + 300. Solve the following: 1. Derive expressions for the corresponding short-run average cost, average variable cost,average fixed cost curve, and marginal cost.2. Calcalute the firm’s short-run supply curve with market price (P) as a function of Q (thenumber of kilos of cabbage)3. Show the industry supply curve for the 50 firms in this industryIn a certain perfectly competitive market, there are 150 firms, and the short-run total cost function of each is given by Short Term Total Cost (q) = 3q³ - 16q² + 40q + 432 (note that "q" is the quantity produced by the firm). Besides that, any firm (active or potential entrant) can produce according to the total cost function Short Term Total Cost (q) = 2q³ - 16q² + 148q (desconsidering the entrance or exit of firms). Furthermore, the inverse aggregate demand function of this market corresponds to Pd(Q) = 676 - 0.56Q (which "Q" is the total quantity demanded). Based on this information, please check True or False in the arguments below: 1-The profit that each producer makes in the short-run competitive equilibrium is greater than the profit that each producer makes in the long-run competitive equilibrium. True or False? 2-In the long-term competitive equilibrium, there are 200 active firms in this market. True or False? 3-The price p* = 105 and the quantity Q* = 750 composes the…