Question

Suppose all firms in the market are identical with the following production function. x = f(l,k)...

Suppose all firms in the market are identical with the following production function.

x = f(l,k) = A l bk b

Also, each firm faces a recurring fixed cost FC.

a. Now let A=30, b = 1/3, FC = 1,000, w = 10 and r = 15. What is the long-run equilibrium price of output? How many units of output does each firm produce?

Suppose the market demand is 50,000,000/P2

b. How many firms are in the market in the long-run?

Suppose the market is initially in both long run and short-run equilibrium. Now FC rises to 2,000.

c. What is the short-run equilibrium price and market output?

d. What is the long-run equilibrium price and market output? How many firms are the market.

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
Suppose all firms in the market are identical with the following production function. x = f(l,k)...
Suppose all firms in the market are identical with the following production function. x = f(l,k) = A l bk b Also, each firm faces a recurring fixed cost FC. a. Now let A=30, b = 1/3, FC = 1,000, w = 10 and r = 15. What is the long-run equilibrium price of output? How many units of output does each firm produce? Suppose the market demand is 50,000,000/P2 b. How many firms are in the market in the...
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...
Consider a competitive market with identical firms that is in long-run equilibrium. Which of the following...
Consider a competitive market with identical firms that is in long-run equilibrium. Which of the following statements captures the sequence of events from the short run to the long run after demand increases? a.When demand increases, price rises in the short run, causing each firm to produce more and earn a profit. The profit induces entry of new firms into the market until price returns to its initial value and each firm earns zero profit. b.When demand increases, price falls...
Suppose the market consist of 300 identical firms, and the market demand is given by ?...
Suppose the market consist of 300 identical firms, and the market demand is given by ? = 60 − ?. Each firm has a short-run total cost curve ??? = 0.1 + 150?2. 1) What is the short-run equilibrium price in this market? 2) What is the profit-maximizing quantity for each firm?
Suppose in Pakistan, all the firms are identical with identical cost curves which mean industry is...
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...
Perfect Competition Question The market for study desks is characterized by perfect competition. All firms are...
Perfect Competition Question The market for study desks is characterized by perfect competition. All firms are identical; in particular, they have the same technology (and thus the same cost function). The total cost function of the representative firm is given by the following equation: TC = 4(qS)2+8(qS)+64 Suppose that the market demand is given by: PD = 840 − 2QD Note: Q represents market values and q represents individual firm values. a) Determine the equation for average total cost for...
A firm sells its product in a perfectly competitive market where other firms sell an identical...
A firm sells its product in a perfectly competitive market where other firms sell an identical product at a price of $120 per unit. The firm's total cost is c(q) = 2500 + q2. (a) How much output should the firm produce in the short-run? (b) If all the other competitors in the market have the same cost function, what would you expect to happen to the price of the output in the long-run? Explain your answer clearly and, if...
A perfectly competitive industry consists of many identical firms, each with a long-run total cost of...
A perfectly competitive industry consists of many identical firms, each with a long-run total cost of LTC = 800Q – 10Q^2 + 0.1Q^3. a. In long-run equilibrium, how much will each firm produce? b. What is the long-run equilibrium price? c. The industry's demand curve is QD = 40,000 – 70P. How many units do consumers buy in long-run equilibrium? How many firms are in the industry? d. Suppose the industry's demand curve rises to QD = 40,600 – 70P....
Suppose a representative firm in a perfectly competitive industry has the following total cost of production...
Suppose a representative firm in a perfectly competitive industry has the following total cost of production in the short run: TC = Q3 - 60Q2 + 3000Q. a) What will be the long run equilibrium quantity for the firm? What will be the long run equilibrium price in this industry? b) If the industry demand is given by QD = 12400 - 4P. how many firms will be active in the long- run equilibrium? c) Suppose the firm faces a...
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...