4. Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 500 + 0.5q Marginal cost: MC = q Where q is an individual firm's quantity produced. The market demand curve for this product is Demand: Q" = 120 – P Where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market (a) What is each firm's fixed cost? What is its variable cost? Give the equation for average total cost.
4. Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 500 + 0.5q Marginal cost: MC = q Where q is an individual firm's quantity produced. The market demand curve for this product is Demand: Q" = 120 – P Where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market (a) What is each firm's fixed cost? What is its variable cost? Give the equation for average total cost.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
Section: Chapter Questions
Problem 9PA
Related questions
Question
![4. Suppose that each firm in a competitive industry has the
following costs:
Total cost: TC = 500 + 0.5q
Marginal cost: MC = q
Where q is an individual firm's quantity produced. The market
demand curve for this product is
Demand: Q" = 120 – P
Where P is the price and Q is the total quantity of the good.
Currently, there are 9 firms in the market
(a) What is each firm's fixed cost? What is its variable cost?
Give the equation for average total cost.
(b) Graph average-total-cost curve and the marginal-cost curve
for q from 5 to 15. At what quantity is average-total-cost curve
at its minimum? What is marginal cost and average total cost at
that quantity?
(c) Give the equation for each firm's supply curve.
(d) Give the equation for the market supply curve for the short
run in which the number of firms is fixed.
(e) What is the equilibrium price and quantity for this market in
the short run?
(f) In this equilibrium, how much does each firm produce?
Calculate each firm's profit or loss. Is there incentive for firms
to enter or exit?
(g) In the long run with free entry and exit, what is the
equilibrium price and quantity in this market?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd96911c0-14f6-4c69-bcd4-ae73aa3a6a8f%2F122b15e7-cc9c-41d3-9af0-e99d910719dd%2Fouqug2h_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. Suppose that each firm in a competitive industry has the
following costs:
Total cost: TC = 500 + 0.5q
Marginal cost: MC = q
Where q is an individual firm's quantity produced. The market
demand curve for this product is
Demand: Q" = 120 – P
Where P is the price and Q is the total quantity of the good.
Currently, there are 9 firms in the market
(a) What is each firm's fixed cost? What is its variable cost?
Give the equation for average total cost.
(b) Graph average-total-cost curve and the marginal-cost curve
for q from 5 to 15. At what quantity is average-total-cost curve
at its minimum? What is marginal cost and average total cost at
that quantity?
(c) Give the equation for each firm's supply curve.
(d) Give the equation for the market supply curve for the short
run in which the number of firms is fixed.
(e) What is the equilibrium price and quantity for this market in
the short run?
(f) In this equilibrium, how much does each firm produce?
Calculate each firm's profit or loss. Is there incentive for firms
to enter or exit?
(g) In the long run with free entry and exit, what is the
equilibrium price and quantity in this market?
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