a, b, and c of this have already been solved (see attached). Attachment also includes original question. (d) How much is the total surplus of this economy? (e) Now suppose that the industry makes a one-time investment for $K amount of dollars to innovate in a new technology of production that allows every firm to reduce its cost of production to a 1/4 fraction of the previous cost. What is the new total surplus of the economy? Who is benefiting the most from the industry innovation?(f) Is it reasonable to assume that in the long-run $K is exactly equal to the size of the industry profits? why? We know that for a perfectly-competitive-market the individual supply curve is the marginalcost(MC) curves. MC is the derivative of the total cost(TC) function with respect to quantity(y)a. Here, the individual MC will beÖTC(y;)MC; =(;) - 25,- 2y;%3D%3DdyjAlso in a perfectly-competitive-market MC and price(P) are equal so the individual supply(ss)function will be:P = 2yjYjb. Market supply(SS) will bePY = 100y; = 100 × = 50Pc. Given the demand function, the equilibrium price(P) and Quantity(Y) will be:At equilibriumQD=Qs200 – 50P = 50P100P = 200%3DP = 2Y == 50P = 50× 2 = 100 Tech firms produce goods and services from labor and energy. The total cost in dollars to produce yamount of goods and services for each firm j is c;(y;) = y? . There are 100 identical tech firms whichall behave competitively.

We are going to calculate total surplus to solve this problem.

Answered: a, b, and c of this have already been…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a, b, and c of this have already been solved (see attached). Attachment also includes original question.

(d) How much is the total surplus of this economy?

(e) Now suppose that the industry makes a one-time investment for $K amount of dollars to innovate in a new technology of production that allows every firm to reduce its cost of production to a 1/4 fraction of the previous cost. What is the new total surplus of the economy? Who is benefiting the most from the industry innovation?

(f) Is it reasonable to assume that in the long-run $K is exactly equal to the size of the industry profits? why?

We know that for a perfectly-competitive-market the individual supply curve is the marginal
cost(MC) curves. MC is the derivative of the total cost(TC) function with respect to quantity(y)
a. Here, the individual MC will be
ÖTC(y;)
MC; =
(;) - 25,
- 2y;
%3D
%3D
dyj
Also in a perfectly-competitive-market MC and price(P) are equal so the individual supply(ss)
function will be:
P = 2yj
Yj
b. Market supply(SS) will be
P
Y = 100y; = 100 × = 50P
c. Given the demand function, the equilibrium price(P) and Quantity(Y) will be:
At equilibrium
QD=Qs
200 – 50P = 50P
100P = 200
%3D
P = 2
Y =
= 50P = 50× 2 = 100

Tech firms produce goods and services from labor and energy. The total cost in dollars to produce y
amount of goods and services for each firm j is c;(y;) = y? . There are 100 identical tech firms which
all behave competitively.

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