Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 25, Problem 3WNG
To determine
Determine whether the firm in the figure earns profit, if it produces quantity Q3 and charge price P3.
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Determine equations for P=f(Q), MR=f(Q), ATC=f(Q, Q2), AVC=f(Q, Q2), MC=f(Q, Q2). Recall that your marginal equations should be derivatives of your totals!
Determine the profit-maximizing price and quantity. (Since MC is in terms of Q2, solving with calculus and algebra can be messy unless you know the quadratic formula. Your table should give an exact answer.)
How much total profit would your firm earn if you set P and Q according to part b?
Describe the competitiveness of the market by calculating the…
Why is the assumption that a corporation or company with market power will charge the highest price they can a false one?
P 14 13 12 11 10 9 8 7 6 5
QD 50 100 150 200 250 300 350 400 450 500
Consider a market with the above demand and two firms. Both firms have a constant marginal cost of 7.
What price should these firms charge to maximize total industry profit? (Note: the marginal condition we learned will work here but you need to be careful because the changes in quantity on the schedule are not 1. Because of this, you might want to use a brute force approach here. It's worth thinking about how you would reconcile it with the marginal condition though. Also, the marginal condition doesn't match exactly so take the best number from the schedule.)
Assuming that if they set the same price, they split the market evenly, what will the profit of each firm be if they both set the above price?
Now imagine that the firms agree to both set the above…
Chapter 25 Solutions
Economics (MindTap Course List)
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