Suppose that the monthly market demand schedule for Frisbees is: Price $8 $7 $6 $5 $4 $3 $2 $1 Quantity Demanded 100 200 400 800 1,600 3,200 6,000 15,000 Suppose further that the marginal and average costs of Frisbee production for every competitive firm are Rate of Output 10 20 30 40 50 60 Marginal Cost $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 Average Cost $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 Finally, assume that the equilibrium market price is $5 per Frisbee. (a) How many Frisbees are being sold in equilibrium? (b) How many (identical) firms are initially producing Frisbees? (c) How much profit is the typical firm making?
Suppose that the monthly market
|
Price |
$8 |
$7 |
$6 |
$5 |
$4 |
$3 |
$2 |
$1 |
|
Quantity Demanded |
100 |
200 |
400 |
800 |
1,600 |
3,200 |
6,000 |
15,000 |
Suppose further that the marginal and average costs of Frisbee production for every competitive firm are
|
Rate of Output |
10 |
20 |
30 |
40 |
50 |
60 |
|
Marginal Cost |
$2.00 |
$3.00 |
$4.00 |
$5.00 |
$6.00 |
$7.00 |
|
Average Cost |
$2.00 |
$2.50 |
$3.00 |
$3.50 |
$4.00 |
$4.50 |
Finally, assume that the equilibrium market price is $5 per Frisbee.
(a) How many Frisbees are being sold in equilibrium?
(b) How many (identical) firms are initially producing Frisbees?
(c) How much profit is the typical firm making?
(d) In view of the profits being made, more firms will want to get into Frisbee production. In the long run, these new firms will shift the market supply curve to the right and push the price down to
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
