Consider a quantity competition setup with two firms simultaneously choosing the quantities. The market demand function is given by P = 100 − Q. The total cost function of a firm is given by T Ci = F + 10qi if qi > 0 0 otherwise. (a) For what value of the fixed cost F, we are going to have multiple equilibrium?
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2. Consider a quantity competition setup with two firms simultaneously choosing the quantities. The
market demand function is given by P = 100 − Q. The total cost function of a firm is given by
T Ci = F + 10qi if qi > 0
0 otherwise.
(a) For what value of the fixed cost F, we are going to have multiple equilibrium?
(b) For what values of the fixed cost F, we are going to have at least one firm producing zero quantity
as an equilibrium?
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- Short-run supply and long-run equilibrium Consiber the competitive market for rhodium. Assume that no matter how many firms operate in the induatry, every firm is identical and faces the same marpinal cost (MC), averapt total cost (ATC), and average variable cost (AVC ) curves plotted in the following praph. The following graph plots the market demand curve for thodium. If there were 10 firms in this market, the short-run equilibrium price of rhodium would be per pound. At that price, firms in this industry would. Therefore, in the long run, firms would the rhodium market. Because you know that competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be per pound. From the graph, you can see that this means there will be firms operating in the rhodium industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. True FalseSuppose that each firm in a competitive industry has the following costs: where q is an individual firm’s quantity produced. The market demand curve for this product is where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market. What is each firm’s fixed cost? What is its variable cost? Give the equation for average total cost. 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? Give the equation for each firm’s supply curve. Give the equation for the market supply curve for the short run in which the number of firms is fixed. What is the equilibrium price and quantity for this market in the short run? In this equilibrium, how much does each firm produce? Calculate each firm’s profit or loss. Is there incentive for firms to enter or exit? In the long run with…2. Suppose that a market consists of 650 idetical fims, all with the same cost curve: TC(q) = 325q² + 0.3. The market demand is given by Qd(p) = 50 – p (a) What is the equilibriun price and quantity? (b) What quantity must each firm produce and sell at equilibrium? (c) Do fims make positive profits in the market equilibrium? (d) Calculate consumers' surplus, producers' surplus and total surplus. (e) The government imposes a tax of 12 per unit of the product on the suppliers. What will be the new equilibrium price and quantity? (f) Do firms make positive profits at market equilibrium? (g) What will be the new consumes surplus, produces surplus and total surplus? (h) Calculate the value of the DWL imposed by the tax.
- Suppose there are only two firms in a competitive market for a good. Firm 1's marginal cost curve is given by MC = 2.5 +0.5Q and the equation of 4+Q³. What is the equation of the - firm 2's marginal cost curve is MC supply function for this market? - a) MC = 6.5 +1.5Q⁹ b) MC = 0.33Q⁹ +3 c) Q³ = 3p - 9 d) P = 6.5 +1.5QsConsider a competitive industry with a large number of firms, all ofwhich have identical cost functions c(y) = y2 + 1 for y > 0 and c(0) = 0. Supposethat initially the demand curve for this industry is given by D(p) = 52 − p.(a) What is the supply curve of an individual firm?(b) If there are n number of firms, what is the industry supply curve?(c) What is the smallest price at which the product can be sold?(d) Based on your answers to parts (a)-(c), explain in detail theequilibrium points based on the market activity with respect to the price, firmand industry.The figure below shows the supply and the demand for a good (left) and the cost curves of an individual firm in this market (right). Assume that all firms in this market, including the potential entrants, have identical cost curves. Initially, the market is in equilibrium at point A. Price Cost MC ATC A 4 2 1 D 2 4 6 8 10 12 Quantity Quantity Refer to the figure above. Suppose that the market has reached the long-run equilibrium. Then, due to news of the product's defects and recall, the demand falls by 4 units at each price. At the new equilibrium, each firm in the market earns and there will be a. zero economic profit; neither entry nor exit of firms b. positive economic profit; entries of new firms C. zero accounting profit; both entry and exit of firms d. negative economic profit; exit of existing firms
- COURSE: MICROECONOMICS - Bertrand's ModelAssume that a market is supplied by 2 companies, whose total costs are: CTi = 100Respective demand of each is: q1 = 120 - 2p1 + p2 and q2 = 120 - 2p2 + p1It is requested to:(a) calculate the firms' profit and reaction function.(b) plot the market equilibrium price and reaction function(d) calculate equilibrium quantity produced by each firm(e) determine profits that both firms will have at equilibrium.The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a purely competitive firm that produces novelty ear buds. Assume the market for novelty ear buds is a competitive market and that the price of ear buds is $6.00 per pair. Buddies Production Costs MC ($) Quantity of Ear Buds 5 10 15 20 25 30 35 40 2.00 2.45 3.55 4.00 5.50 5.98 8.52 pairs ATC ($) 2.00 2.00 2.15 2.50 2.80 3.25 3.64 4.25 Check my work Instructions: In part a, enter your answer as the closest given whole number. In parts b-d, round your answers to two decimal places. a. If Buddies wants to maximize profits, how many pairs of ear buds should it produce each week? b. At the profit-maximizing quantity, what is the total cost of producing ear buds? c. If the market price for ear buds is $6 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what will Buddies profit or loss be per week? d. Now assume the market price is $5.50 per pair, and Buddies produces the…a. The charged is determined by the market equilibrium. For a perfectly competitive firm, it is depicted as a horizontal line on the firm level graph, and also equals demand and marginal revenue (D=MR). minimum ATC profit-maximizing output losses profits ATC at profit-maximizing output price c. The is one of the pieces of information needed to calculate profits/losses for the firm. It can be found once quantity produced is chosen by a firm. Graphically, it is the point on the average total cost curve once this choice is made. It also helps determine two vertices of the profit/loss rectangle. minimum ATC ATC at the profit-maximizing output profit price profit-maximizing output quantity at minimum ATC b. The chosen by a firm will be determined by the intersection of the firm-level demand curve and the marginal cost curve (which is their firm level supply curve). minimum ATC losses price ATC at the profit-maximizing output profits profit-maximizing output d. can be calculated as (P - ATC)…
- Consider the market for solar power. Assume the market is perfectly competitive and initially in long-run equilibrium; solar power sells for $.25 per kwh (kilowatt hour, a unit of power). Draw2graphs, oneto represent the market (supply and demand), and one to represent asingle firm (demand, marginal cost, and average cost curves). Assume a u-shaped average cost Show the equilibrium price and the quantity produced by the market (Q) and by each individual firm (q).Suppose there are 500 identicsl competitivd firms producing widgets and assume the total cost curve for each firm is given as, TC= 5q2+wq+10 and marginal cost is given as MC=10q + w where w is the widget maker's wage and q is the firm's output. If w=$50 what is the equation of the firms short run supply curve? 1) what is the average firm's profit (losses) at the new price of $61? 2) is the average firm in the short-run or long run? given it's profit(losses) should the firm continue to operate? 3) what would you predict, based on the perfectly competitive model of markets, will happen in this industry in the long run?6. Suppose that there are two identical firms in the silver mining industry. The cost curve of each firm is C(Q) = 0.25Q². Quantity (Q) is measured in troy ounces per day. Demand per day for silver is QD = 408 - 8P where price (P) is measured in dollars per troy ounce. a) If the two firms are price takers, then what are the supply curves of each firm? What is the industry supply curve? b) If the two firms behave as price takers, then what will be the price and quantity that clear the market? d) c) If the firms formed a cartel, then what would be the marginal cost of the cartel? If the cartel is a monopolist, then what price will the cartel charge for silver? What quantity will it sell? Illustrate the demand, marginal revenue and marginal cost curves in a diagram. Assume that the firms in the cartel divide the production and the profits equally. e) What are the profits of an individual firm in the cartel? f) Suppose that firm 1 “cheats" on the cartel by producing 2 more ounces than its…
