MindTap Cengage Learning - Google ChromeXng.cengage.com/static/nb/ui/evo/index.html?deploymentld=5673661865502013311021331068elSBN=97813370965778&id=5715231408snapshotld=1338562&CENGAGE MINDTAPQ Search this courseDylanXHomework #8MAIN MENU,quantity demanded willand the quantity supplied byAs this market makes the transition to its long-run equilibrium, the price willMy Homeeach firm willCoursesUse the orange line (square point) to graph the long-run supply curve for this market.A-ZCENGAGE UNLIMITED?Browse CatalogPartner Offers201918EE Print Options17Long-Run Supply1615College Success1413Career Center121110?Help7Give Feedback653EquilibriumAC0MARKET1020405060708090100QuantityMarket EquilibriumGrade It NowSave & ContinueContinue without saving10:07 PMType here to searchC x2611/6/201930*

Question
Asked Nov 7, 2019
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10. Problems and Applications Q10

An industry currently has 100 firms, each of which has fixed costs of $16 and average variable costs as follows:
Complete the following table by deriving the total cost, marginal cost, and average total cost for each quantity from 1 to 6.
Quantity
Average Variable Cost
Total Cost
Marginal Cost
Average Total Cost
(Dollars)
(Dollars)
(Dollars)
(Dollars)
0   16    
 
1 1
 
    
 
2 2
 
    
 
3 3
 
    
 
4 4
 
    
 
5 5
 
    
 
6 6
 
    
 
 
The equilibrium price is currently $10.
Each firm produces __________ units, so the total quantity supplied in the market is _________ units.
 
In the long run, firms can enter and exit the market, and all entrants have the same costs as in the previous table.
As this market makes the transition to its long-run equilibrium, the price will  _______  , quantity demanded will  ________  , and the quantity supplied by each firm will  _________  .
 
Use the orange line (square point) to graph the long-run supply curve for this market.
 
 
MindTap Cengage Learning - Google Chrome
X
ng.cengage.com/static/nb/ui/evo/index.html?deploymentld=5673661865502013311021331068elSBN=97813370965778&id=5715231408snapshotld=1338562&
CENGAGE MINDTAP
Q Search this course
Dylan
X
Homework #8
MAIN MENU
,quantity demanded will
and the quantity supplied by
As this market makes the transition to its long-run equilibrium, the price will
My Home
each firm will
Courses
Use the orange line (square point) to graph the long-run supply curve for this market.
A-Z
CENGAGE UNLIMITED
?
Browse Catalog
Partner Offers
20
19
18
EE Print Options
17
Long-Run Supply
16
15
College Success
14
13
Career Center
12
11
10
?Help
7
Give Feedback
6
5
3
Equilibrium
AC
0
MARKET
10
20
40
50
60
70
80
90
100
Quantity
Market Equilibrium
Grade It Now
Save & Continue
Continue without saving
10:07 PM
Type here to search
C x
26
11/6/2019
30
*
help_outline

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MindTap Cengage Learning - Google Chrome X ng.cengage.com/static/nb/ui/evo/index.html?deploymentld=5673661865502013311021331068elSBN=97813370965778&id=5715231408snapshotld=1338562& CENGAGE MINDTAP Q Search this course Dylan X Homework #8 MAIN MENU ,quantity demanded will and the quantity supplied by As this market makes the transition to its long-run equilibrium, the price will My Home each firm will Courses Use the orange line (square point) to graph the long-run supply curve for this market. A-Z CENGAGE UNLIMITED ? Browse Catalog Partner Offers 20 19 18 EE Print Options 17 Long-Run Supply 16 15 College Success 14 13 Career Center 12 11 10 ?Help 7 Give Feedback 6 5 3 Equilibrium AC 0 MARKET 10 20 40 50 60 70 80 90 100 Quantity Market Equilibrium Grade It Now Save & Continue Continue without saving 10:07 PM Type here to search C x 26 11/6/2019 30 *

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Expert Answer

Step 1

The completed table is given below.

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Marginal Cost Average Total (Dollars) Total Variable Total Cost Quantity Average Variable cost (Dollars) Cost cost (Dollars) (Dollars) (Dollars) 0 16 1 1 1 17 17 2. 4 20 10 3 3 25 8.33 4 4 16 32 5 5 25 41 9 8.2 6 6 36 52 11 8.66

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Step 2

The firm will produce the quantity at which marginal cost is lower than or equal to the market price in the perfectly competitive competition. Each firm will produce 5 units of output because at this point market price ($10) is greater than the marginal cost (MC) of producing the 5th unit. Thus at the equilibrium price, each firm produces 5 units and the total quantity supplied (Qs) is 500 units (5*100) by the 100 firms.

Step 3

In the long run, where firms are free to enter and exit in the market, the market price will fall leading to an increase in the quantity demanded and an increase in the quantity supplied by the firm. The reason behind the same is that firms will enter in the market i...

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