Suppose each firm's long run average cost curve, for positive levels of output, is give by AC = 0.1 + 0.05y + 2. The marginal cost curve is given by MC = 0.1+0.1y. (a) Find the level of output, for which the average cost is minimized. (b) What is the firm's minimum average cost? (c) Suppose you have many identical firms in a long run competitive equilibriur Demand is p = 13.1 – 0.04Q. What is the market quantity? How many firms a
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- Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2 Marginal cost: MC = q where q is an individual firms quantity produced. The market demand curve for this product is Demand:QD = 120 P where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market. a. What is each firms fixed cost? What is its variable cost? Give the equation for average total cost. b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity? c Give the equation for each firms supply curve. d. Give the equation for the market supply curve for the short run in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market in the short run? f. In this equilibrium, how much does each firm produce? Calculate each firms profit or loss. Is there incentive for firms to enter or exit? g. In the long run with free entry and exit, what is the equilibrium price and quantity in this market? h. In this long-run equilibrium, how much does each firm produce? How many firms are in the market?Question 3 The current market price in a competitive industry is $15. Every firm in the industry operates a technology that implies costs described by the function C = 12.5 + 0.3Q2. In the future, the technology is expected to change, and the new cost function will then be C = 10 + 0.2Q2. How much profit is the typical firm making today and in the long run? O. Profit is zero both today and in the long run. O. Profit is 125 both today and in the long run. O. Profit is 175 today and zero in the long run. O. Profit is 250 today and 125 in the long run.Figure 7.1 shows a firm’s total revenue and total cost curves. If the firm were producing Q1, it should a. expand output to Q2 to maximize profit. b. reduce output to zero to maximize profit. c. expand output to Q3 to maximize profit. d. expand output beyond Q3 to maximize profit. e. continue to produce Q1, which is the profit-maximizing output.
- Question 1 a. Draw the marginal cost and average total cost curves for a typical firm. Explain why the curves have the shapes that they do and why they cross where they do. b. Does a competitive firm's price equal its marinal marginal cost in the short run, in the long run, or both? Explain c. What is the law of diminishing returns and what does it imply about the shape of the firm's average variable cost and marginal cost curves. d. Using the table below indicate which firm has (i) disc.nomiesof scale and (ii) constant returns to scale over the entire range of output. Explain your answer Question 2 a. Apple faces competition from many other firms in the owrld market for mobile phones; therefore, apple cannot have market power. Do ou agree with this statement? b. the mrginal revenue for a perfectly competitive firm is equal to the market price. Why is this not the case for a monopolist? c. A social cost is applied to the monopolist market structure. Why does this occur?…12. If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true thata. marginal revenue exceeds marginal cost.b. marginal cost exceeds marginal revenue.c. total cost exceeds total revenue.d. None of the above is correct.1. A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than A. $100 per pound. B. $20 per pound. C. $80 per pound. D. $40 per pound. E. $60 per pound. 2. If a firm is currently producing zero output, total costs equals A. average variable costs. B. marginal costs. C. zero. D. total variable costs. E. total fixed costs. 3. Here are three things that you could do if you do not attend your next-door neighbor's barbecue: watch television with some friends (you value this at $8), read a good novel (you value this at $4), or go in to work (you could earn $6 during the barbecue). The opportunity cost of going to your neighbor's barbecue is A. $6, because this is the only alternative of the three where you actually receive a monetary payment. B.…
- A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed cost of $200.\a. What is its profit?b. What is its marginal cost?c. What is its average variable cost?d. Is the efficient scale of the firm more than, less than, or exactly 100 units?(a) How much will the firm produce in order to maximise profits at a price of £8 per unit and What will be its average cost of production at this output? ..................................................... (b) How much (supernormal) profit will it make and How much will the firm produce in order to maximise profits at a price of £5 per unit? . (c) Below what price would the firm shut down in the short run and Below what price would the firm shut down in the long run?Answer the following: 1. Assuming that the product’s price is P58 per pack, should the competitor sell in the short-runWhy or why not?If it decides to sell, what will be the profit-maximizing (or loss-minimizing output per day)?What is the profit (or loss) that the seller can realize per day? What is the profit (or loss) per pack?A. Assuming that the product price is P42 per pack, answer the same questions in letter A.B. Because of increasing sellers of masks in the market, the product’s price further decreased to P32per pack. Again, answer the same questions in letter A.C. When is this seller going to shut down?D. Now generate the seller’s supply curve of mask in the short run.
- QUESTION 2 (a) Use the concepts of economies and diseconomies of scale to explain the shape of a firm’s long-run ATC curve. What is the concept of minimum efficient scale? What bearing can the shape of the long-run ATC curve have on the structure of an industry? (b) If a firm in monopoly maximizes revenue, does it automatically maximize profit too? Explain the content with relevant example and diagrams.5. Consider the marginal revenue and marginal cost curves shown in Figure 7.13. Assume that the firm represented is able to cover its variable costs if it operates in the short run. What is the firm's optimal output level? a. 150 units b. 80 units c. 50 units d. less than 50 units e. between 50 and 80 units Choose and explain your answer above thoroughly--graphical, algebraically, numerically.A Milton company works in perfect competition market, its total cost curve in short run is given in this function: TC = 200 − 4Q + 0.5Q2 a. What output level should the firm produce to maximize profit? knowing that averagerevenue is $10. b. What is the firm profit at this level of output?>>>>>>>>>>>>>>>>>>>>>>>>>>>>Suppose the production function for high quality brandy is given by : Q = √KLWhere q is the output of brandy per week and L is labor hours per week ., in the short run K is fixed at 100, so the short run production function is Q = 10√L a. If the capital rents for 10$ and the wage are 5$per hour ., write the short run total cost function. b. How much will the firm produce at a price of 20$ per bottles of brandy ? c. How many labor hours will be hired per week?…