PROBLEM #1 The cost function for a typical firm, competing in a perfectly competitive market, is as follows: C(q)=80+4q² , where q represents the firm's output. a. Is this a long-run or short-run cost function? Briefly explain. Find the average variable cost (AVC) and marginal cost (MC) functions, as a function of q, for the typical firm. b. The market demand for this product is Q=2160-P and the market supply is Q=2P. Find the market equilibrium price and quantity. Then use your results to find the profit-maximizing level of output that the typical firm will produce. c. Based on your answer in part b, find the profit that the typical firm will earn. Based on the profits you found, do you expect firms to exit this industry, enter this industry, or neither? (Assume that all economic costs are included in the cost function.) Briefly explain your answer.

PROBLEM #1 The cost function for a typical firm, competing in a perfectly competitive market, is as follows: C(q)=80+4q² , where q represents the firm's output. a. Is this a long-run or short-run cost function? Briefly explain. Find the average variable cost (AVC) and marginal cost (MC) functions, as a function of q, for the typical firm. b. The market demand for this product is Q=2160-P and the market supply is Q=2P. Find the market equilibrium price and quantity. Then use your results to find the profit-maximizing level of output that the typical firm will produce. c. Based on your answer in part b, find the profit that the typical firm will earn. Based on the profits you found, do you expect firms to exit this industry, enter this industry, or neither? (Assume that all economic costs are included in the cost function.) Briefly explain your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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