ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- Suppose that each firm in a competitive industry has the following costs:
Total cost: TC = 50 + 1/2q2
Marginal cost: MC = q
Where q is an individual firm’s quantity produced. The market demand curve for the 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.
- What is each firm’s fixed cost? What is its variable cost? Give the equation for
average total cost . - Graph the average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is the average-total-cost curve at its minimum? What is the 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 the market in the short run? - In this equilibrium, how much does each firm produce? Calculate the firm’s
profit and loss . Do firms have incentive to enter or exit?
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