Suppose that each firm in a competitive industry has thefollowing costs: Total cost: TC=50 + 1/2q^2 Marginal cost: MC=q where q is an individual firm’s quantity produced. The marketdemand 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. Graph average total cost curve and the marginal cost curvefor q from 5 to 15. At what quantity is average total cost curve atits minimum? What us marginal cost and average total cost at thisquantity? c. Give the equation each firm’s supply curve. d. Give the equation for the market supply curve for the shortrun in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market inthe short run? f. In this equilibrium, how much does each firm produce?Calculate each firm’s profit or loss. Is there incentive for firmsto enter or exit? g. In the long run with free entry and exit, what is theequilibrium price and quantity in this market? h. In this long run equilibrium, how much does each firmproduce? How many firms are in the market?
Suppose that each firm in a competitive industry has thefollowing costs:
Total cost: TC=50 + 1/2q^2
Marginal cost: MC=q
where q is an individual firm’s quantity produced. The marketdemand 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. Graph average total cost curve and the marginal cost curvefor q from 5 to 15. At what quantity is average total cost curve atits minimum? What us marginal cost and average total cost at thisquantity?
c. Give the equation each firm’s supply curve.
d. Give the equation for the market supply curve for the shortrun in which the number of firms is fixed.
e. What is the
f. In this equilibrium, how much does each firm produce?Calculate each firm’s profit or loss. Is there incentive for firmsto enter or exit?
g. In the long run with free entry and exit, what is theequilibrium price and quantity in this market?
h. In this long run equilibrium, how much does each firmproduce? How many firms are in the market?
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