Question

Consider a competitive market in which the market demand for the product is expressed as: P...

Consider a competitive market in which the market demand for the product is expressed as: P = 164 - 0.0002Q, and the supply of the product is expressed as: P = 4 + 0.0003Q. The typical firm in this market has a marginal cost of MC = 4 + 1.2q.

a. Determine the equilibrium market price and output. Calculate the consumer surplus and the producer surplus at equilibrium in the industry. (2+2+2 = 6 points)

b. Determine the output of the typical firm, given your answer to part (a) above. How many firms are there in the industry? (2+2 = 4 points)

c. If the market demand were to increase to P = 172 - 0.0002Q, what would the new price and output in the market be in the short-run? What would the new output for the typical firm be? (Do not round up your answer.) (2+2 = 4 points)

d. If the original supply and demand represented a long-run equilibrium condition in the market (assuming constant cost industry), would the new equilibrium (c) represent a new long-run equilibrium for the typical firm? Explain. (2+2 = 4 points)

e. To be in the long-run equilibrium with the new demand, how many firms would enter into or leave from the industry? Show your work.  (2+8 = 10 points)

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider a competitive market in which the market demand for the product is expressed as: P...
Consider a competitive market in which the market demand for the product is expressed as: P = 104 - 0.002Q, and the supply of the product is expressed as: P = 4 + 0.0005Q (make sure to count the zeros correctly). The typical firm in this market has a marginal cost of MC = 4 + 0.8q. a. Determine the equilibrium market price and output. Calculate the consumer surplus and the producer surplus at equilibrium in the industry. b. Determine...
Long-run equilibrium for a perfectly competitive firm is expressed by which of the following equations? a....
Long-run equilibrium for a perfectly competitive firm is expressed by which of the following equations? a. MC = LRAVC = SRAVC b. MC = MR = LRAC = SRATC c. MR = MC = SRAVC = SRATC d. MC = MR = SRTC = AFC Free market entry is defined by which of the following? a. Markets do not charge firms a fee to enter. b. There is no cost for firms to enter into a market. c. Firms with...
In a perfectly competitive market, market demand is QD = 380 – 2P and market supply...
In a perfectly competitive market, market demand is QD = 380 – 2P and market supply is QS = 2P - 20. Each firm has short-run MC = 5Q and ATC = 2.5Q + (100/Q) (ATC is at minimum when Q = 6.32). 4. How much output will each firm produce? a. 180 b. 10 c. 20 d. 100 5. What is the profit/loss for each firm in the short-run? a. $-7, 000 b. $900 c. $2, 500 d. $0...
Assume the following market is a pure competitive and all firms are identical with the same...
Assume the following market is a pure competitive and all firms are identical with the same costs functions: ?? = 100 + 80 ∗ ? + ? 2 ?? = 80 + 2? The market demand is ? = 150 −?? The equilibrium price in short run is $100. Note that Q is the market quantity and q is the quantity produced by a single firm. 1) Calculate the output that minimizes average total cost (ATC). (2 points) 2) What...
Suppose that the market for some good is competitive and the demand curve can be written...
Suppose that the market for some good is competitive and the demand curve can be written as Qd= 200 - 4P and the supply curve can be written as Qs= 20 + 2P What is the equilibrium price and quantity in the market? Suppose that every firm in the market has total costs which can be expressed as TC= 8+10Q+5Q^2.  What is the marginal cost function of each firm? How much will each firm produce? How many firms are currently in...
Problem 1. Suppose global demand in the perfectly competitive yoga mat industry is characterized by the...
Problem 1. Suppose global demand in the perfectly competitive yoga mat industry is characterized by the following function: QD=490,000-1,000P. Suppose the typical yoga mat manufacturer has a short-run total cost curve characterized by STC = 0.01q2 - 8q+9, so SMC = 0.02q-8. (4 points) Calculate the typical firm's short-run average cost function. At what level of output does short-run average cost reach a minimum? (4 points) Calculate the short-run supply curve for the typical firm and the industry short-run supply...
The goal of this problem is to compare perfect competitive outcome (scenario 1) with monopoly outcome...
The goal of this problem is to compare perfect competitive outcome (scenario 1) with monopoly outcome (scenario 2). In both two scenarios, market demand is given by Q=1200-50P. Scenario 1: Consider a perfectly competitive market with 150 identical firms. Each firm’s marginal costs are given by MC=q+4. (4pts) Determine the equation for market supply curve. Find the equilibrium price and industry output. 1. Determine the equation for market supply curve. Find the equilibrium price and industry output. 2. Plot the...
Consider a perfectly competitive market where the market demand curve is p(q) = 1000 − q....
Consider a perfectly competitive market where the market demand curve is p(q) = 1000 − q. Suppose there are 100 firms in the market each with a cost function c(q) = q2 + 1. (a) Determine the short-run equilibrium. (b) Is each firm making a positive profit? (c) Explain what will happen in the transition into the long-run equilibrium. (d) Determine the long-run equilibrium.
Suppose that the perfectly competitive for market for milk is made up of identical firms with...
Suppose that the perfectly competitive for market for milk is made up of identical firms with long-run total cost functions given by: TC = 4 q3 - 24 q2 + 40 q Where, q = litres of milk. Assume that these cost functions are independent of the number of firms in the market and that firms may enter or exist the market freely. If the market demand is : Qd = 8,000 - 160 P 1. What is the long-run...
Consider a perfectly competitive market where the market demand curve is p(q) = 1000-q. Suppose there...
Consider a perfectly competitive market where the market demand curve is p(q) = 1000-q. Suppose there are 100 firms in the market each with a cost function c(q) = q2 + 1. (a) Determine the short-run equilibrium. (b) Is each firm making a positive profit? (c) Explain what will happen in the transition into the long-run equilibrium. (d) Determine the long-run equilibrium.