= 3. Assume that the manufacturing of generic medicine XYZ is a perfectly competitive industry. Suppose that the annual demand for this medicine is given by: QD 1,450-30P. There are exactly a hundred manufacturers in the market. Each manufacturer has the same production costs. These are described by total and marginal cost functions of: C(q) = 2q² + 25q +2.5 and MC(q) = 5q + 25. a. Show that an individual firih in this industry maximizes profit by producing: q = -5 +0.2P. b. Derive the industry supply curve and show that it is: QS = -500 + 20P. c. Find the market price and aggregate quantity traded at the equilibrium price. II

= 3. Assume that the manufacturing of generic medicine XYZ is a perfectly competitive industry. Suppose that the annual demand for this medicine is given by: QD 1,450-30P. There are exactly a hundred manufacturers in the market. Each manufacturer has the same production costs. These are described by total and marginal cost functions of: C(q) = 2q² + 25q +2.5 and MC(q) = 5q + 25. a. Show that an individual firih in this industry maximizes profit by producing: q = -5 +0.2P. b. Derive the industry supply curve and show that it is: QS = -500 + 20P. c. Find the market price and aggregate quantity traded at the equilibrium price. II

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.1P: A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new...

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Question

3. Assume that the manufacturing of generic medicine XYZ is a perfectly competitive industry. Suppose that
the annual demand for this medicine is given by: QD = 1,450 - 30P. There are exactly a hundred
manufacturers in the market. Each manufacturer has the same production costs. These are described by
5
total and marginal cost functions of: C(q) = q² + 25q + 2.5 and MC(q) = 5q + 25.
a. Show that an individual firm in this industry maximizes profit by producing: q = -5 +0.2P.
b. Derive the industry supply curve and show that it is: QS = -500 + 20P.
c. Find the market price and aggregate quantity traded at the equilibrium price.
d.
How much output does each firm produce?
e.
f.
Calculate each firm's profit.
Using market demand and supply functions (QD, QS):
i. Graphically represent the equilibrium in the market;
ii. Calculate producer surplus; and
iii. Consumer surplus in this competitive equilibrium.
Li
11.
total cost and demand of an individual firm in

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price
aggie to
d. How much output does each firm produce?
e. Calculate each firm's profit.
f.
Using market demand and supply functions (QD, QS):
i. Graphically represent the equilibrium in the market;
ii. Calculate producer surplus; and
iii.
Consumer surplus in this competitive equilibrium.

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