Let us consider an economic sector characterized by the following data. The (inverse) demand function is p = 20 -2g with q the quantities produced by the firms in the secto and p the price. The total cost of production for any firm in the sector is: CT(q) = q² - 4g + 5 a) First, assume that there is only one firm, firm 1, in the industry. Calculate the price, quantity produced and profit of firm 1 in a monopoly situation that wan to maximize its profit

Let us consider an economic sector characterized by the following data. The (inverse) demand function is p = 20 -2g with q the quantities produced by the firms in the secto and p the price. The total cost of production for any firm in the sector is: CT(q) = q² - 4g + 5 a) First, assume that there is only one firm, firm 1, in the industry. Calculate the price, quantity produced and profit of firm 1 in a monopoly situation that wan to maximize its profit

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.1P: A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new...

See similar textbooks

Similar questions

Demand for microprocessors is given by P = 35 – 5Q , where Q is the quantity of microchips (in millions). The typical firm’s total cost of producing a chip is Ci = 5qi, where qi is the output of firm i. a) Does the typical microchip firm display increasing, constant, or decreasing returns to scale? What would you expect about the real microchip industry? In general, what must be true about the underlying technology of production for competition to be viable?
Suppose that each firm in a competitive industry has the following identical costs:Total cost: TC = 25+0.25Q2,where Q is an individual firm’s quantity produced.The market demand curve for this product is as follow:Demand: P=60-0.095Q,where P is the price and Q is the total quantity of the good. Currently. (i) Identify each firm’s fixed cost, variable cost, and its marginal cost.(ii) Suppose that there are 10 firms in the market. Construct the market supply function in the short run. Determine the equilibrium price and quantity. (Hint: If each firm’s supply function is Qi= a+bP then the market supply Qm can be the aggregated supply at each price as Qm = Q1+Q2+Q3+...+Qi where Qi is each firm’s supply function.)
Firm A and Firm B sell identical goods The total market demand is:Q(P) = 1,000-1.0P The inverse demand function is therefore: P(QM) = 10,000-10QM QM is total market production (i.e., combined production of firm’s A and B). That is: QM = QA + QB As a result, the inverse demand curve for each firm is: P(QA,QB) = 10,000-10QA-10QB The difference between this example and the example in class is that the two firms have different costs. Firm A has the same cost as in class, but firm B has a different cost function: TCA(QA) = 5000QA TCB(QB) = 5000QB Using the demand function and the cost functions above, what is firm A’s profit function? Using the profit function above and assuming that firm B produces QB, calculate what firm A’s best response is to firm B’s decision to produce QB. (Note: Firm A’s best response should be a function of QB) Using the demand function and the cost functions above, what is firm B’s profit function? Using the profit function above and assuming that firm A…
The market demand for Gucci bags is given by the function P = 75 - 1.5Q. P is price per bag, and Q is output per time period. The market supply is given as P = 25 + 0.50Q. A typical competitive firm that markets this type of bag has a marginal cost of production of MC = 2.5 + 10q. a) Calculate the market equilibrium price for the bags as well as the output rate in the market. b) Calculate how much the typical firm will produce per time period at the equilibrium price. c) If all firms had the same cost structure, how many firms would compete at the equilibrium price computed in (a) above?
Can you help with parts d,e and f please? A perfectly competitive firm has the following total cost function: TC = 4,500 + 2q + .0005q2 where TC is total cost in dollars and q is the quantity of output produced. a. Assume this perfectly competitive market consists of 800 firms with cost structures identical to the one above. What is the equation for the market supply curve? Assume the market demand curve is: Qd = 5,600,000 – 400,000P where Qd is the quantity demanded in the market and P is the commodity’s price in dollars. b. What is the market’s equilibrium price? c. Assuming the market is in equilibrium, using marginal revenue and marginal cost determine the firm’s profit-maximizing quantity of output? What does the profit-maximizing firm’s total economic profit equal? Assume the total cost function above: TC = 4,500 + 2q + .0005q2 is associated with the short-run total cost function that corresponds to the minimum point on the long-run average total cost curve and this is a…
Consider a homogeneous goods industry where two firms operate and the linear demand is given by p(y1 + y2 ) = a - b(y1 + y2 ), where p is the market price, and y1 (y2) is the output produced by firm 1 (2). There are no costs for firm 1 or firm 2. A. What is the industry output? B. Suppose the inverse demand curve in a market is D(p) =a-bp, where D(p) is the quantity demanded and p is the market price. Firm 1 is the leader and has a cost function c1(y1)=cy1 while firm 2 is the follower with a cost function c2(y2 )= y^22/2 (image of function attached). Firm 1 sets its price to maximise its profit. Firm 1 correctly forecasts that the follower takes the price leader’s chosen price as given (price taker) and chooses output so as to maximise its own profit. Write down the profit function of the follower. Calculate the profit maximising quantity that the follower selects given the leader’s chosen price p (i.e., calculate the follower’s supply curve S(p)). Interpret the solution to the…
Assume the demand function for a product is given by QD = 20,000 – 10P + 0.4I, where P = price of the product, and I = average income of consumers. Also, assume the supply function of the product is given by QS = 30P. If the market for the product is perfectly competitive, and the average income of consumers is $10,000, what are the equilibrium price and quantity in this market?
Consider the market for Atlantic salmon. Petuna, Tasmania’s smallest salmon farm, and Huon Aquaculture, a large corporate supplier, are both producers of Atlantic salmon. The marginal cost curves for both firms are shown in the graph below: If the market price is $13 per kilo of salmon, how many kilos of salmon would Petuna supply? What about Huon Aquaculture? How many total kilos would they collectively supply? Is this allocation the most productively efficient way to produce this quantity of salmon? i will give thumbs up thanks
Suppose that a firm produces identical commodities and sell them in two separate markets charging two different prices. The demand for the commodity in two markets are (1) P1 = 100 - Q1 and (2) P2 = 80 - Q2, where P1 and P2 are the price of the product that the firm charges, while Q1 and Q2 are demand in each market. Suppose that the firm's cost of production is C(Q) = 6Q. (1) What is the firm's total profit function in terms of the quantity of output? How much should this firm sell each product in two separate markets to maximize total profits?
Consider the competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. The following diagram shows the market demand for titanium. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 20 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 30 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 40 firms. If there were 20 firms in this market, the short-run equilibrium price of titanium would be $_______ per pound. At that price, firms in this…
Consider the market for bicycles in the fictional province of Westvale. The market demand function for bicycles is given by P=300-2Q. The marginal cost curve for firms in this market is given by P=40+Q. Prices are measured in dollars. a) Under a competitive market equilibrium, what is the price of a bicycle? b) How many bicycles are produced under a competitive market equilibrium? c) Calculate consumer surplus, producer surplus, and total surplus under the competitive market equilibrium Suppose that the firms that were once competing in this market merge into one single firm, forming a monopoly. This monopoly has a marginal revenue function of P=300-4Q. d) What price does this monopolist charge? e) How many bicycles does the monopolist produce? f) Calculate consumer surplus, producer surplus, and total surplus under the monopolistic market outcome g) How much deadweight loss resulted from the creation of the monopolist?
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?