Consider the market demand schedule: Price Quantity Demanded 10 45,000 11 35,000 12 25,000 15,000 5,000 13 14 and a given firm's cost structure: Quantity Marginal Cost Average Total Cost 100 11.00 14.00 150 12.00 13.50 200 13.00 13.00 250 14.00 13.50 300 15.00 14.00 Suppose there are 200 identical firms operating in the perfectly competitive market. In the long-run equilibrium, the number of firms operating will be and the market price will be S
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- The AC and MC values for firms in a perfectly competitive industry are as follows: Q AC MC 1 12 2 8 20 3 12 4 16 36 5 20 8 24 52 7 28 60 8 32 68 36 76 Suppose that there are 70 firms operating in the industry. Using the MC curve, find out how much output in total is delivered to the market at each price (you only need to consider prices equal to the MC values above). Now assume that the market demand curve is given by p 305 .5Q, where p is the market price. For purposes of this problem, it is helpful to "invert" the demand curve, writing Q in terms of p. This gives Q=610 2p a) Verify that when p 44 the market has O A. excess supply O B. excess demand equal to units. When p 68, the market has O A. excess demand O B. excess supply equal to units. and profit per firm equals(don't include S signs in b) Find the market equilibrium price, and compute output per firm and profit per firm at this price (you need only check prices corresponding to the above MC values. The equilibrium price is p…a) What is the market price? P = $0 b) What is the industry's output? Industry Output: 0 c) What is the output of each firm? Output: 0 d) What is the economic profit of each firm? Round your answer to 2 decimal places. Profit: $0 e) What is the shut down price? Shutdown price: $0 f) What is the long run equilibrium price? You can assume that the above ATC applies to both short run and long run. Conceptually, in the long run the column AVC disappears. Graphically, the amount of output K in both long run and short run is the same. P = $0 g) What is the number of firms in the industry in long run? Round your answers to the nearest whole number. Number of firms: 0Why can't a perfectly competitive firm charge a price premium (sell at a higher price) relative to other firms in the industry (what would happen if a firm attempted to do so)? What is the term given to perfectly competitive firms since they must sell at the market equilibrium price?
- One way to increase profits in your business is to find a way to reduce your costs. Use the average cost and marginal cost curves presented in class to represent a firm that finds a way to reduce its costs. Assume the firm operates in a perfectly competitive industry, where the typical firm has no market power and free entry and exit eliminate economic profits. Use your diagram to show the economic profit the firm earns after it reduces its costs, but also use your diagram to show how the firm will adjust its price and quantity as other firms enter the industry. Complete your analysis by explaining why the price a firm receives for its product will tend to bear a relationship to its cost structure, even if competition is not perfect.Assume the following regarding a firm in Perfect Competition: Market Demand = Qd 460-3P Market Supply = Qs = 9 P Each identical firm has: MC=4q ATC = 14 1. What price will the firm charge? Number 2. What is the firm's equilibrium quantity? Number 3. What is the firm's total cost? Number 4. What is the firm's total revenue? Number 5. What is the firm's profit or loss? (use a negative sign to indicate a loss) Number 6. Is the firm in a short-run or long-run situation? Click for ListThe table below shows the total cost (TC) and marginal cost (MC) for Choco Lovers, a purely competitive firm producing different quantities of chocolate gift boxes. The market price for a box of chocolates is $8 per box. Instructions: Enter your answers as a whole number. a. Fill in the marginal revenue (MR) and average revenue (AR) columns. Choco Lovers Cost and Revenue Quantity TC MC MR AR of Gift Boxes ($) ($) ($) ($) 20 115 5 25 137 4.50 30 162 35 192 40 232 8 45 282 10 Instructions: For profit/loss, round your answers to two decimal places. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. A loss should be entered as a negative number. b. Given a price of $8 per gift box, how many boxes of chocolate should Choco Lovers produce? gift boxes What will the profit or loss be per gift box? $ per gift box c. Suppose that Choco Lovers raises the price to $10 per gift box. Now how many boxes should Choco Lovers produce? gift boxes…
- The graph below shows a perfectly competitive firm in short run equilibrium, where the firm has chosen the output level maximizing its profit. Consider the level of profits being earned here, and what will happen over time. What will happen in the long run? Note that the horizontal demand curve, D1, is also equivalent to marginal revenue and price. Group of answer choices The market price will increase causing economic profits to increase Demand will increase causing economic profits to increase The market price will decrease until economic profit is zeroPart A Equilibrium for the Perfectly Competitive Industry Consider Figure 34.1. Assume that the market described by the figure is perfectly competitive, and MC represents the horizontal summation of marginal cost curves and, therefore, the market supply curve. Use Figure 34.1 to answer the following questions. Figure 34.1 Perfect Competition 12 MC 11 10 9. 3 2- 1- 1 2 3 4 56 7 8 9 10 11 12 QUANTITY 1. What quantity of output will be produced? 2. What price will the market establish? 3. Calculate the amount of the consumer surplus. Darkly shade the area of consumer surplus. 4. Calculate the amount of the producer surplus. Lightly shade the area of producer surplus. COSTS/REVENUE1) If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: 2) A firm that is motivated by self interest should 3) If price is above the equilibrium level, competition among sellers to reduce the resulting 4) Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can't keep up with the quantity demanded at that price), then we would expect both Camille's and Julia's to 5) Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement 6) In a market economy the distribution of output will be determined primarily by 7) In a competitive market economy firms will select the least-cost production technique because 8) Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut…
- Suppose that the perfectly competitive tuna Industry is In long-run equilibrium at a price of $3 per can of tuna and a quantity of 600 million cans per year. Suppose the Surgeon General Issues a report saying that eating tuna is bad for your health. The Surgeon General's report will cause consumers to demand Shift the supply curve, the demand curve, or both on the following diagram to illustrate these short-run effects of the Surgeon General's announcement. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Supply X Demand 400 600 800 QUANTITY (Millions of cans) 0 0 In the long run, some firms will respond by 5 0 200 0 200 Demand 1000 Shift the supply curve, the demand curve, or both on the following diagram to Illustrate both the short-run effects of the Surgeon General's announcement and the new long-run equilibrium after firms…A firm producing ice pop in a perfectly competitive market with an equilibrium price of $1.50 has the following Quantity of ice Total Cost pops 0 $3 10 $8.00 20 20 $10.50 30 $15.50 59 40 $30.50 50 $50.50 60 60 $75.50 70 70 $105.50 What is this firm's marginal revenue from the 50th unit? MR(50) = $ What is this firm's marginal revenue from the 60th unit? MR(60) = $Homework 1 1. Suppose there are 100 identical firms in the perfectly competitive notecard industry. Each firm has a short-run total cost curve of the form: 1 3 C = 5q³ + 0.2q² + 4q + 10 300 a) Calculate the firm's short-run supply curve with q (the number of crates of notecards) as a function of market price (P). b) Calculate the industry supply curve for the 100 firms in this industry. (Answer. QS = 1000/P-2000) c) Suppose market demand is given by: Q=-200P+ 8,000. What will be the equilibrium price-quantity combination? (Answer. P = $25; Q = 3000 units) d) Suppose everyone starts writing more research papers and the new market demand is given by: Q =-200P + 10,000. What is the new price-quantity equilibrium? How much profit does each firm make? (Answer. ₁ = $576,14)