Suppose the short run market price a competitive firm faces is Birr 9 and the total cost of the firm is: TC = 200 + Q + 0.02Q 2 . Answer the questions that follow. (A) Calculate the short run equilibrium output and profit of the firm. (B) Derive the MC, ATC, and AVC and calculate the values at the short run equilibrium output. (C) Calculate the producers’ surplus at the equilibrium output. (D) Find the output level that will make the profit of the firm zero.

Suppose the short run market price a competitive firm faces is Birr 9 and the total cost of the firm is: TC = 200 + Q + 0.02Q 2 . Answer the questions that follow. (A) Calculate the short run equilibrium output and profit of the firm. (B) Derive the MC, ATC, and AVC and calculate the values at the short run equilibrium output. (C) Calculate the producers’ surplus at the equilibrium output. (D) Find the output level that will make the profit of the firm zero.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter25: Monopoly

Section: Chapter Questions

Problem 9E

See similar textbooks

Similar questions

A perfectly competitive industry is in long-run equilibrium. Each of the identical firms has a long- run cost function C = 100 + q². As a result, a firm's marginal cost function is MC = 2q. In the long-run competitive equilibrium, (a) How much does the firm produce? (b) What is the equilibrium price? (c) If the market quantity demanded at the equilibrium price is Q = 2500, how many firms are in the market?
1) When the market price is 10, MC=2q where q is quantity. Suppose the firm choose not shutting down, how many units of output will the firm produce? A) 10 B) 2 C) 5 D) 1 2)When the market price is 10, MC=2q where q is quantity. Suppose ATC=5 and AVC=3, will the firm shut down? How much is the profit? A) Shut down, Profit= - 10 B) shut down, profit=10 C)Do not shut down, profit=25 D)Do not shut down, profit=50 3) When the market price is 2, MC=2q where q is quantity. Suppose ATC=5 and AVC=3, will the firm shut down? How much is the profit? A) Shut down, profit= - 3 B) Shut down, profit= - 2 C) Do not shut down, profit= - 3 D) Do not shut down, profit=-2
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
You are given the following information for a producer of organic grommets in a perfectly competitive market. TFC = $7 Market price = $16 Quantity MC ($) 11 9 10 4 12 15 6 19 The marginal cost of production appears in the table above. What is the profit-maximizing output? Is the firm making a profit or loss? How much? Output: |(Click to select) v$
a) Find the long run equilibrium price. Find the minimum efficient scale of the typical firm. Find the typical firm’s average cost when it operates at minimum efficient scale. In the long run, what price will prevail in this market? In words, clearly justify your answer. Suppose demand is QD = 3,200 – 100P. (b) Explain why you expect the number of firms in this market to be fifty-five. In this market, what is the short run supply function of the typical firm? What is the short run market supply function? Suppose the local government introduced a $90 licensing fee that raised the fixed cost from $160 to $250. c) Would the introduction of the licensing fee affect the short run equilibrium price or quantity? Justify your answer? Clearly explain why you expect that in the long run fewer larger firms will operate in this market. After the introduction of the licensing fee, what is the new long run equilibrium price? How many firms will survive in this market?
Suppose that the firm operates in a perfectly competitive market. The market price of his product is $4. The firm estimates its cost of production with the following cost function: TC=50+20q-5q2+0.33q3 a. What level of output should the firm produce to maximize its profit? b. Determine the level of profit at equilibrium. c. What minimum price is required by the firm to stay in the market?
4. A vertically integrated automobile company has an upstream engine division and a downstream assembly division. The demand for the company's cars is given by Q = 20-P. Each car requires one engine. The downstream division's total cost of assembling cars is TCD(Q) = 4Q. The upstream division's total cost of producing engines is TCv (Q) = Q². (a) Suppose that there is no outside market for engines. What is the price and quantity of cars produced by the company? (b) Suppose that there is no outside market for engines. What should be the transfer price for engines? [Hint: the transfer price of an engine should equal the marginal cost of engine production at the optimal quantity.] (c) Suppose that there is a competitive outside market in which the price of an engine is 12. What is the price and quantity of cars produced by the company? (d) Suppose that there is a competitive outside market in which the price of an engine is 12. What is the quantity of engines that the company buys or…
A firm's short-run total cost function is TC = 4q²-2g+7 The firm sells in a perfectly competitive market and the ruling price is p = 50 (a) Find the output level that maximizes profits. Show you have a maximum. (b) Find the output level that mininizes average cost, AC. Show you have a minimum. (c) Sketch the graphs of total cost and total revenue with the same axes (d) Sketch the graph of the profit function.
(a) Let the industry producing soybeans be in a long-run equilibrium. What is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel of soybeans? (b) Suppose that the demand for soybeans drops due to decreased im- port by China and becomes Q = 15.3 − p. In a new long run equilibrium, what is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel? (c) Calculate the change in the producers’ surplus between the situations described in (a) and (b). (d) Show that the decrease in the producers’ surplus equals to the decrease in the total shipping fees as the industry contracts incrementally from the equilibrium output in (a) to the equilibrium output in (b).
You are given the following information for a producer of organic grommets in a perfectly competitive market. TFC $8 Market price = $9 Quantity 1 2 3 4 5 6 MC ($) 8 7 6 8 10 13 The marginal cost of production appears in the table above. What is the profit-maximizing output? Is the firm making a profit or loss? How much? Output: (Click to select) $
Suppose that the market demand for a product is given by Q= A-P (A> 0). Suppose also that in a competitive industry the typical firm's cost function is given by C(g) = a- (а > 0). 2 (a) Calculate the long-run equilibrium market price P and the output for the typical firm q. (b) Calculate the equilibrium number of firms in the market. (c) Derive, and determine the sign of, dn/dA and dn/da. Explain the signs intuitively.
PS4.2 (a) What Optimal Level of Output (q*) will a Firm Produce given the following? MC(q) = 3 + 2q Price (P) = $9 MC → Marginal Cost q→ Quantity (b) What is a Firm's Producer Surplus assuming the following? Area of Triangle = 1/2* Base * Height (c) Will a Firm be Earning a Positive, Negative, or Zero Profit in the Short-Run given the following? AVC (q) =3+q FC = $3 AVC → Average Variable Cost FC Fixed Cost