Question

Suppose daily market demand is illustrated in the table below. Let there be 99 other firms...

  1. Suppose daily market demand is illustrated in the table below. Let there be 99 other firms just like yours, for a total of 100 firms in the market, in the short run. Fill in the table below, assuming there are 100 firms and that you each produce the profit-maximizing quantity at each price.

Price

Supply

Demand

0

1,600

20

1,500

40

1,400

60

1,300

80

1,200

100

1,100

120

1,000

140

900

160

800

180

700

200

600

  1. What is the short-run market price?
  2. At the market equilibrium price, how many flu vaccinations should your company supply per day in the short run?
  3. At that price, what are your short-run economic profits?
  4. Would there be any reason for you to shut down in the short run?
  5. What do you expect to happen to the number of other firms in this industry in the long run?
  6. In the long run, characterize your economic profits.

Homework Answers

Answer #1

a. Price Supply Demand

0 0 1600

20 300 1500

40 560 1400

60 780 1300

80 960 1200

100 1100 1100

120 1200 1000

140 1260 900

160 1280 800

180 1260 700

200 1200 600

Supply at price 20 is 300 i.e 1500/100 *20

a. A short run competitive equillibrium is a situation in which, given in the firms in the market, the price is such that the total amount the firms wish to supply is equal to the total amount the consumers wish to demand.

b. At 100 price 1100 flu vacines are supplied and demand and hence a point of equillibrium.

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