Question

The market for bobble head dolls in Madison is competitive and has the following demand schedule:

Price	Quantity Demanded
1	200
2	190
3	180
4	170
5	160
6	150
7	140
8	130
9	120

Each producer in the market has fixed costs of $9 and the following marginal cost:

Quantity	Marginal Cost
1	1
2	3
3	5
4	7
5	9
6	11
7	13

A. The total cost for each firm when they make 2 bobble heads is:

		A.  12
		B.  9
		C.  17
		D.  3
		E.  13

B. The price of a bobble head is $9. How many bobble heads are sold?

		A.  This cannot be determined from the information given.
		B.  120
		C.  0
		D.  150
		E.  5

C. The price of a bobble head is $9. How many bobble heads does each firm produce?

		A.  120
		B.  This cannot be determined from the information given.
		C.  5
		D.  10
		E.  3

D. The price of a bobble head is $9. How many firms are there?

		A.  40
		B.  This cannot be determined from the information given.
		C.  24
		D.  1
		E.  0

E. Is the situation described above a long-run equilibrium?

		A.  No
		B.  Yes
		C.  This cannot be determined from the information given.

Answer 1

ANswer
A)
Cost =fixed cost +sum of the marginal cost of both units
Cost =9+1+3
=$13
option E
--------
B)
From the market demand at P=$9 Q=120 units
the market will sell 120 units
option B
------
C)
From the MC, the individual firm sell at MC=P where q=5 units
each firm will sell 5 units in the market

D)

Number of firms =Q/q
=120/5
=24
Option C

E)
Option A
No
There is a fixed cost means some of the inputs or minimum one input is fixed. It means it is a short run situation.