Suppose in a perfectly competitive industry that the market supply and demand forces combine to produce a short-run equilibrium price of $70. Suppose further that a single firm in this industry has a weekly total cost function expressed by the equation: TC=200+ 50q6q² + (1/3)q³.
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- 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+0.01Q2 At profit maximizing level what is firm total cost, total revenue and marginal costThe 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+0.01Q2 What is the firm’s profit-maximizing output level and profit? Is this profit normal profit or supper normal profit? Justify your answerProblem 2: Suppose in a perfectly competitive industry that the market supply and demand forces combine to produce a short-run equilibrium price of$100. Suppose further that a single firm in this industry has a weekly total cost function expressed by the equation: \[ \mathrm{TC}=200+60 q-6 q^{2}+(1 / 3) q^{3} \] (a) Calculate the equations facing the firm: demand, MR, and AR. (b) Calculate the following cost equations of this firm: TFC, TVC, AFC, AVC, MC, and ATC. (c) What is this firm's profit maximizing level of output? What are its profits? (d) At what level of (q) will this firm shut down its operations?
- Assume the market for chips is perfectly competitive. The market supply and demand curves for chips are given as follows: supply curve: P = 0.000002Q demand curve: P = 11 - 0.00002Q The short run marginal cost curve for a typical chips factory is: MC = 0.1 + 0.0009Q Determine the equilibrium price for chips. Determine the profit maximizing short run equilibrium level of output for a chips factory. Assuming that all of the chips factories are identical, how many chips factories are producing chips?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.]Suppose that a perfectly competitive firm faces a market price of $12 per unit, and at this price the upward-sloping portion of the firm's marginal cost curve crosses its marginal revenue curve at an output level of 1,800 units. If the firm produces 1,800 units, its average variable costs equal $7.00 per unit, and its average fixed costs equal $1.00 per unit. What is the firm's profit-maximizing (or loss-minimizing) output level? What is the amount of its economic profits (or losses) at this output level?
- Solve questions (iii) and (iv) only Suppose there is a perfectly competitive industry where all the firms are identical with identical cost curves. Furthermore, suppose that a representative firm’s total cost is given by the equation TC = 100 + q2 + q where q is the quantity of output produced by the firm. You also know that the market demand for this product is given by the equation P = 1000 – 2Q where Q is the market quantity. In addition, you are told that the market supply curve is given by the equation P = 100 + Q.i. What is the equilibrium quantity and price in this market given this information?The firm’s MC equation based upon its TC equation is MC = 2q + 1. Given this information and your answer in part (i), what is the firm’s profit maximizing level of production, total revenue, total cost and profit at this market equilibrium?ii. Is this a short-run or long-run equilibrium? Explain your answer.iii. Given your answer in part (ii), what do you anticipate will happen in this…Assume the following total cost schedule for a perfectly competitive firm. Output TVC TFC 0 0 100 1 40 100 2 70 100 3 120 100 4 180 100 5 250 100 6 330 100 The total cost of producing 6 units of output is __________________ If the firm is producing at an output level of 2 units, the ATC is _____________ and the AVC is ______________ The profit-maximizing firm would shut down in the short run if the market price of its output dropped below ___________________ At what price would a profit-maximizing firm earn zero economic profits? _______________Marginal Analysis II Question 1 Assume that a competitive firm has the total cost function: TC=1q3−40q2+870q+1500TC=1q3-40q2+870q+1500 Suppose the price of the firm's output (sold in integer units) is $700 per unit. Using calculus and formulas to find a solution (don't just build a table in a spreadsheet as in the previous lesson), how many integer units should the firm produce to maximize profit? Please specify your answer as an integer. Hint 1: The first derivative of the total cost function, which is cumulative, is the marginal cost function, which is incremental. The narrated lecture and formula summary explain how to compute the derivative. Set the marginal cost equal to the marginal revenue (price in this case) to define an equation for the optimal quantity q. Rearrange the equation to the quadratic form aq2 + bq + c = 0, where a, b, and c are constants. Use the quadratic formula to solve for q: q=−b±b2−4ac−−−−−−−√2aq=-b±b2-4ac2a For non-integer quantity, round up and down to…
- 40) A perfectly competitive firm will earn ________ economic profits in the range of output for which the firm's price is above its minimum average total cost. A) positive B) negative C) zero D) Any of the above answers could be correct. 41) If a perfectly competitive firm's average total cost curve is below its demand schedule at any level of output, then the firm will earn ________ profits. A) positive B) breakeven C) negative D) zero 42) A perfectly competitive firm ________ at the level of output where P = ATC. A) earns an economic profit B) suffers an economic loss C) breaks even D) shuts down 43) If P = MC and MC ATC, then a perfectly competitive firm will earn ________ profits. A) positive B) zero C) negative D) break-even 44) If a perfectly competitive firm is currently producing where P = MC and MC = ATC, then the firm will earn ________ profits. A) positive B) zero C) negative D) above normal 45) If…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?A firm in a perfectly competitive market faces a market price of $80, and has a total cost function: TC(Q) = Q3 – 28Q2 + 245Q + 1000. A. If the firm charges $85, how many units will they sell? B. If this firm produces Q = 15, is their profit maximized? C. If these are short run conditions and the firm is producing Q = 15, should the firm stay open or shut down temporarily? Clearly show or explain your reasoning.
