1. A competitive industry is composed of 24 identical firms. Each firm has the following marginal cost of production in the short-run: MC = 58 +8Q. Each firm has the following Total Cost of production in the short-run: TC = 2 + 58Q + 4Q². Demand for the product is given by the following demand curve: Qd = 1,211 - 2P. a. Explain why each firm will produce where market equilibrium price (Pº) equals the firm's marginal cost of production (MC). b. Derive an equation for the industry supply curve (i.e., Q₁ = .....).
1. A competitive industry is composed of 24 identical firms. Each firm has the following marginal cost of production in the short-run: MC = 58 +8Q. Each firm has the following Total Cost of production in the short-run: TC = 2 + 58Q + 4Q². Demand for the product is given by the following demand curve: Qd = 1,211 - 2P. a. Explain why each firm will produce where market equilibrium price (Pº) equals the firm's marginal cost of production (MC). b. Derive an equation for the industry supply curve (i.e., Q₁ = .....).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![1. A competitive industry is composed of 24 identical firms. Each firm has the following
marginal cost of production in the short-run: MC = 58 +8Q. Each firm has the following
Total Cost of production in the short-run: TC = 2 + 58Q +4Q². Demand for the product is
given by the following demand curve: Qd = 1,211 - 2P.
a. Explain why each firm will produce where market equilibrium price (Pe) equals the
firm's marginal cost of production (MC).
b. Derive an equation for the industry supply curve (i.e., Q₁ = .....).
c. Find the market equilibrium price and quantity..
d. Are firms in this industry earning profit or losses in the short-run? (Hint: first compute
how much output each firm produces).
e. Compute the deadweight loss that would be produced if the government placed a
$15 per unit tax on suppliers..
f. Who bore the greater burden of the tax, consumers or producers? Explain.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb0f18c60-2b14-4c75-a028-a9713e3a91b4%2Fe68ec953-95df-47b2-9bde-44da81541d0c%2Fb1rlkep_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. A competitive industry is composed of 24 identical firms. Each firm has the following
marginal cost of production in the short-run: MC = 58 +8Q. Each firm has the following
Total Cost of production in the short-run: TC = 2 + 58Q +4Q². Demand for the product is
given by the following demand curve: Qd = 1,211 - 2P.
a. Explain why each firm will produce where market equilibrium price (Pe) equals the
firm's marginal cost of production (MC).
b. Derive an equation for the industry supply curve (i.e., Q₁ = .....).
c. Find the market equilibrium price and quantity..
d. Are firms in this industry earning profit or losses in the short-run? (Hint: first compute
how much output each firm produces).
e. Compute the deadweight loss that would be produced if the government placed a
$15 per unit tax on suppliers..
f. Who bore the greater burden of the tax, consumers or producers? Explain.
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