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2. Suppose this market segment was supplied by a competitive market rather than a single firm...

2. Suppose this market segment was supplied by a competitive market rather than a single firm with monopoly power. demand equation is given by P(q) = 10 –q. Its total cost of producing its output is given by the function TC(q) = (q2/8) + q+ 16, Then the demand curve would be the market demand curve, and the marginal cost equation MC(q) = (q/4) + 1. would represent the competitive market supply curve.

a.If this were a competitive market, what would be the short-run competitive market equilibrium price and quantity? Calculate these. Mark the competitive equilibrium price and quantity on your graph as point B.

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Answer #2

In the case of perfectly competitive market
equilibrium price under perfectly competitive market is P=MC.
Thus 10-q = (q/4)+1
40-4q = q+4
   q=7.2
Hence, required profit-maximizing quantity is 7.2 units and price at this level of production is (10-72)) $2.8

answered by: anonymous
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