Question

The goal of this problem is to compare perfect competitive outcome (scenario 1) with monopoly outcome (scenario 2). In both two scenarios, market demand is given by Q=1200-50P.

Scenario 1: Consider a perfectly competitive market with 150 identical firms. Each firm’s marginal costs are given by MC=q+4. (4pts) Determine the equation for market supply curve. Find the equilibrium price and industry output.

1. Determine the equation for market supply curve. Find the equilibrium price and industry output.

2. Plot the demand curve and the supply curve in the same graph. Put quantity on the horizontal axis. Calculate the consumer surplus and producer surplus.

3. Suppose each firm has a standard U-shaped long-run average cost curve that reaches a minimum of $9 at an output level of 5 units, is the market in long run equilibrium? Explain. What is the total profit for each firm?

Scenario 2: Consider instead a monopoly market with only one
firm. The firm’s marginal costs are given by
*MC=**1**150**Q+4.*

4. What is the profit-maximizing output and price for this monopolist? Round your answer to the nearest integer.

Answer #1

Q=1200-50P

MC=q+4

150 identical firms

1. For market supply curve:

In perfect competition P=MC

P=q+4

q= P-4

There are 150 identical firms, so

Q=150q= 150(P-4)= 150P-600 (Market supply curve)

2. Equilibiurm price:

Demand = supply

1200-50P=150P-600

1800=200P

P=9

Q= 750

Consumer surplus= 1/2(Pm-P*)(Q*)= 1/2(15)(750)= 5625

Producer surplus= 1/2(P*-Pc)(Q*)= 1/2*5*750= 1875

3. As there are 150 identical firm the total output divided equally:

q=Q/150= 750/150=5

Profit of each firm= (P-AC)q= (9-9)5= 0

4. *MC=**1**150**Q+4*

Q=1200-50P

50P=1200-Q

P= (1200-Q)/50=AR

TR= AR*Q= (1200Q-Q2)/50

MR= dTR/dQ= (1200-2Q)/50

For profit maximization:

MR=MC

(1200-2Q)/50=*1**150**Q+4*

*1200-2Q= 57500Q+200*

*1000= 57502Q*

*Q= 0.017*

*p= (1200-0.017)/50= 23.99=24*

1. Compared with a perfectively competitive market a monopoly is
inefficient because
a. it raises the market price above marginal cost and produces a
smaller output.
b. it produces a greater output but charges a lower price.
c. it produces the same quantity while charging a higher
price.
d. all surplus goes to the producer.
e. it leads to a smaller producer surplus but greater consumer
surplus.
2. The demand curve of a monopolist typically...

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...

Problem 1. A perfectly competitive painted necktie industry has
a large number of potential entrants. Each firm has an identical
cost structure such that long-run average cost is minimized at an
output of 20 units (qi = 20). The minimum average cost is $10 per
unit. Total market demand is given by: Q = 1,500 – 50P. a. What is
the industry’s long-run supply schedule? b. What is the long-run
equilibrium price (P*), the total industry output (Q*), and the...

1) For each question below, compare perfect competition vs
monopoly with a constant marginal cost;
a)Explain and show how each firm determines its own demand curve
and compare the shape or slope of their demand curve and marginal
revenue curve.
b) Explain show and contrast how each type of the firm
determines the profit maximizing price and quantity and also
compare the resulting market equilibrium price and quantity.
c) Show and compare the markets producers’ surplus, consumer
surplus and deadweight...

Assume that the manufacturing of barbie doll is a perfectly
competitive industry. The market demand for barbie doll is
described by a linear demand
function :Qd = 6000 – 50P ; P =
price of a barbie doll.
9 There
are fifty manufacturers of barbie dolls. Each manufacturer has the
same
production costs given as TC(q) = 100 +q2 + 10q ; q =
quantity of barbie doll. Show that a firm in this industry maximizes profit by
producingq = (P -10)...

A perfectly competitive constant-cost industry has a large
number of potential entrants. Assume that each firm minimizes its
LRAC at an output of 20 units and at an average cost of $10/unit
and has an upward sloping MC curve. Market demand is given by QD =
1500 – 50P.
a. Draw a LR graph representing each firm, including the LR
equilibrium price, quantity, and profit.
b. Draw a graph of the LR demand and supply for the market,
including the...

Question 3:
A competitive industry consists of identical 100 producers,
all of whom operate with the identical short-run total cost curve
TC(Q)=40+2Q2TC(Q)=40+2Q2, where QQ is the annual output of a firm.
The market demand curve is QD=300−50PQD=300−50P, where PP is the
market price.
What is the each firm's short-run supply curve?
What is the short-run industry supply curve?
Determine the short-run equilibrium price and quantity in this
industry.

The market demand function for a good is given by Q = D(p) = 800
− 50p. For each firm that produces the good the total cost function
is TC(Q) = 4Q+ Q^2/2 . Recall that this means that the marginal
cost is MC(Q) = 4 + Q. Assume that firms are price takers.
(a) What is the efficient scale of production and the minimum of
average cost for each firm? Hint: Graph the average cost curve
first.
(b) What...

Suppose there is a perfectly competitive industry in Dubai,
where all the firms are identical. All the firms in the industry
sell their products at 20 AED. The market demand for this product
is given by the equation: (Total marks = 5)
Q = 25 – 0.25P
Furthermore, suppose that a
representative firm’s total cost is given by the equation:
TC = 50 +4Q +
2Q2
What is the inverse demand function for this market?
Calculate the MC function?
Calculate...

Suppose there is a perfectly competitive industry in Dubai,
where all the firms are identical. The market demand for this
product is given by the equation: (Kindly answer clearly)
P = 1000 – 2Q
Also, the market supply equation is
given by the following equation:
P = 100 + Q.
Furthermore, suppose that a
representative firm’s total cost is given by the equation:
TC = 100 + q2 + q
What is the equilibrium quantity and price in this market...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 8 minutes ago

asked 19 minutes ago

asked 21 minutes ago

asked 45 minutes ago

asked 54 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago