3. Suppose that each firm in a competitive industry has the following costs:Total Cost: TC = 50+ ¹/29²Marginal Cost: MC = qwhere q is an individual firm's quantity produced. The market demand curve forthis product isDemand: QD = 120-Pwhere P is the price and Q is the total quantity of the good. Currently, there are 9firms in the market.a) What is each firm's fixed cost? What is its variable cost? Give the equation foraverage total cost.b)At q=10, the average-total-cost curve is at its minimum. What is marginal costand average total cost at that quantity?c)With free enter and exit, give the equation for each firm's long run supplycurve.d)Give the equation for the market supply curve for the short run in which thenumber of firms is fixed.e)f)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'sprofit or loss. Do firms have an incentive to enter or exit?g)In the long run with free entry and exit, what is the equilibrium price andquantity in this market?h)In this long-run equilibrium, how much does each firm produce? How manyfirms are in the market?

Total Cost: TC = 50+ (½)q^2 Marginal Cost: MC = q where q is an individual firm's quantity produced.…

Answered: Total Cost: TC = 50 +¹/29² Marginal…

Business

Economics

Total Cost: TC = 50 +¹/29² Marginal Cost: MC = q al firm's quantity produced. The Demand: QD = 120 - P

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

3. Suppose that each firm in a competitive industry has the following costs:
Total Cost: TC = 50+ ¹/29²
Marginal Cost: MC = q
where q is an individual firm's 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 firm's fixed cost? What is its variable cost? Give the equation for
average total cost.
b)
At q=10, the average-total-cost curve is at its minimum. What is marginal cost
and average total cost at that quantity?
c)
With free enter and exit, give the equation for each firm's long run supply
curve.
d)
Give the equation for the market supply curve for the short run in which the
number of firms is fixed.
e)
f)
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. Do firms have an incentive 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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