Question

1. In a given industry located in the town of Teahupo’o all
firms have access to the same technology. The cost curve for
Tikei’s firm is: TC = 3q^{2}, where q is the output of
Tikei’s firm. Marginal cost is MC = 6q.

Initially, there are 60 firms in the industry (Tikei’s firm + Mako’s firm + Moana’s firm + Vanea’s firm + 56 other firms). The 60 firms in the industry are identical in every way.

a) Find the supply curve of Tikei’s firm and of the entire industry in the Short Run. Hint 1: Tikei’s firm supply curve should be of the form q = f(P) (please see footnote[1]). Hint 2: The industry supply curve should be of the form Q= f (P). Be thorough to get full credit. Make sure you show: (a) How to go from the firm’s MC curve to the firm’s supply curve. (b) How you go from one firm’s (Tikei’s firm) supply curve to the industry’s supply curve (i.e., the town of Teahupo’o’s supply curve).

b) If the demand curve for the industry is: *Q = 504 - 2P
*find the short run competitive equilibrium price,
quantity supplied by Tikei’s firm**,** and total
industry supply**.** Find the producer surplus and
consumer surplus for the market level graph (both graphically and
numerically).

c) The government of Teahupo’o decides to intervene in the
market by buying 72 units no matter what the price is. The demand
faced by the industry is now *Q = 576 -2P*. Find the new
short run equilibrium price**,** quantity supplied per
firm**,** and industry supply**.** Graph
the market equilibrium**.** Make sure to label your
axes, your curves, and find the relevant intercepts and
intersections. Also point out how much the government buys and how
much consumers buy on your graph**.**

q=f(P) means it is of a form where q is equal to some function
of P. For example, the supply curve could look like this: q=88P or
q=66+P or q= P/30 or q=80+3P^{2}, etc. These are not the
answer to the question but examples of what q=f(P) means.

Answer #1

Suppose in Pakistan, all the firms are identical with identical
cost curves which mean
industry is perfectly competitive. Now please consider this
following information about the
industry: A representative firm’s total cost is given by the
equation TC = 100 + q2 + q where
q is the quantity of output produced by the firm. You also know
that the market demand for
this product is given by the equation P = 1000 – 2Q where Q is the
market...

1. Suppose that all firms in a constant-cost industry have the
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c(q) = 4q2 + 100q + 100
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a. Derive the supply curve with this restriction. Find the market
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Find the short-run supply function of a perfectly competitive
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run, each of the firms has a fixed supply of 100 units. The
market
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Q = 160, 000 - 10,000P
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1). The market demand function for a good is given by Q = D(p) =
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An industry consists of many identical firms, each with the cost
function C(q)=100+30q-8q^2+q^3
Derive the average cost, average variable cost, and marginal
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Show this area on the graph (label the three...

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