Consider an industry with 9 identical firms, each facing a demand Q = 25,000 x [1/9-1/20 (p -p)], where Q is the output level by the firm, p is the price charged by the firm and p is the average price in the industry. Suppose each firm has a fixed cost 7500 and a marginal cost 40. When there is no entry or exit of any firm, what is the profit level of a firm in a symmetric equilibrium? (Round your answer to the nearest integer.) Your Answer: Answer

Consider an industry with 9 identical firms, each facing a demand Q = 25,000 x [1/9-1/20 (p -p)], where Q is the output level by the firm, p is the price charged by the firm and p is the average price in the industry. Suppose each firm has a fixed cost 7500 and a marginal cost 40. When there is no entry or exit of any firm, what is the profit level of a firm in a symmetric equilibrium? (Round your answer to the nearest integer.) Your Answer: Answer

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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A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new process lowers the firm’saverage cost, meaning that this firm alone (although still aprice taker) can earn real economic profits in the long run. a. If the market price is $20 per widget and the firm’s marginalcost is given by MC=0.4q , where q is the dailywidget production for the firm, how many widgets willthe firm produce? b. Suppose a government study has found that the firm’snew process is polluting the air and estimates the socialmarginal cost of widget production by this firm to be. If the market price is still $20, what is thesocially optimal level of production for the firm? Whatshould be the rate of a government-imposed excise tax tobring about this optimal level of production? c. Graph your results.
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