The table shown displays the total costs for various levels of output for a firm operating in a perfectly competitive market. Price $50 $50 $50 $50 150 $50 When one unit is produced, exceed O marginal costs, marginal revenue, more O marginal revenue; marginal costs more O marginal revenue, marginal costs; less O marginal costs, marginal revenue, less and the fem should produce Quantity 0 1 2 3 4 15 TC $10.00 $20.00 $27.50 $77 50 $147 50 $250 00

The table shown displays the total costs for various levels of output for a firm operating in a perfectly competitive market. Price $50 $50 $50 $50 150 $50 When one unit is produced, exceed O marginal costs, marginal revenue, more O marginal revenue; marginal costs more O marginal revenue, marginal costs; less O marginal costs, marginal revenue, less and the fem should produce Quantity 0 1 2 3 4 15 TC $10.00 $20.00 $27.50 $77 50 $147 50 $250 00

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 2.4P

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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?
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