Q1. a) A local Pepsi company has total costs of production given by the equation TC-500+10q+Sq2. This implies that the firm's marginal cost is given by the equation MC-10+10q. The market demand for cold drink is given by the equation QD-105 (1/2)*P. Write the equations showing the company's average total cost and average variable cost and average fixed cost, each as a function of q. Show the firm's MC, ATC and AVC on one graph. What is the breakeven price and breakeven quantity for this firm in the short run? What is the shutdown price and shutdown quantity for this firm in the short run? If the market price of the output is $50, how many units will this firm produce? iv) Assuming the cold drink industry is perfectly competitive, what output would be produced by the firm in long-run equilibrium? What would be the long-run equilibrium price? i) ii)

Q1. a) A local Pepsi company has total costs of production given by the equation TC-500+10q+Sq2. This implies that the firm's marginal cost is given by the equation MC-10+10q. The market demand for cold drink is given by the equation QD-105 (1/2)*P. Write the equations showing the company's average total cost and average variable cost and average fixed cost, each as a function of q. Show the firm's MC, ATC and AVC on one graph. What is the breakeven price and breakeven quantity for this firm in the short run? What is the shutdown price and shutdown quantity for this firm in the short run? If the market price of the output is $50, how many units will this firm produce? iv) Assuming the cold drink industry is perfectly competitive, what output would be produced by the firm in long-run equilibrium? What would be the long-run equilibrium price? i) ii)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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