2. Consider a profit-maximizing firm with production function, Y-KO-SL0.5, where Y is output, K is units of capital and Lis number of workers. The firm is a price taker in the market for capital and labour with the rental rate on capital, r, and the wage paid to workers, w. The firm is the only seller in the output market, but the risk of entry of new firms means that the firm is a price taker in the output market, and sells at the equilibrium price, p, output equal to the market demand at that price (Yº).

2. Consider a profit-maximizing firm with production function, Y-KO-SL0.5, where Y is output, K is units of capital and Lis number of workers. The firm is a price taker in the market for capital and labour with the rental rate on capital, r, and the wage paid to workers, w. The firm is the only seller in the output market, but the risk of entry of new firms means that the firm is a price taker in the output market, and sells at the equilibrium price, p, output equal to the market demand at that price (Yº).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Figure A Competitive Firm1.2 MC ATC AVC Given Pl =$7.00 P2 $8.50 P3 =$9.20 QI=100.00 A P3 B P2 P1 MR Quantity Q1 Refer to Figure A Competitive Firm1.2. At an output level of Q1, the average fixed cost is about O $0.70 O No answer text provided. O No answer text provided. O S0.80 %24
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please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
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O Consider a perfectly competitive market where variable input markets are also perfectly competitive but not all firms have the same fixed cost. a. Draw the two-panel competitive model and derive and explain, via a change in demand, the market long run supply curve. b. Explain the difference between profit and producer surplus, in general. Discuss long run profitability for firms and producer surplus (where it comes from and who gets it) in the situation graphed in part a.
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