Question

Monthly demand Qd=100 - 5P and monthly supply is QS= 50+5P the total cost of its production is TC=25Q+Qpower2 +50

What is equilibrium price and quantity in competitive market

What is the firm profit maximizing level of production, total revenue, total cost and profit at this market equilibrium

Answer 1

Equilibrium condition is market demand= market supply so by equating demand and supply function we get

100-5p = 50+5p

P= 5

Putting value of 'p' in demand equation we get

Q= 100-5*5

Q= 75

TC= 25q+q²+50

= 25*75 + 75² + 50 = 7550

Total revenue= price * quantity

= 5*75 = 375

Profit maximize where MC= p

TC= 25q+q²+50

By differetiating total cost equation we get marginal cost with respect to q

MC= 25+2q

Now put MC = p= MR

25+2q= 5

q=-10

Profit = TR- TC

= 375-7550

=-7175

As value is negative because firm is inccurring losses

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