Suppose you are asked to analyze a competitive market with identical firms for the government. You estimate the following: Inverse market demand is: p= 100 -0.01Q, The long-run market supply is: p = 10 Each firm's total cost function is: C(q) = 500 +0.05q² What is the marginal cost faced by each firm? MC = Assuming the industry is in long-run equilibrium, how many firms are currently in this market? (enter your answer rounded to the nearest whole number). Now suppose the government is thinking of restricting the number of firms to only seven. At what quantity will the long-run inverse market supply curve go from being horizontal to upward sloping? The long-run inverse market supply curve will become upward sloping at a quantity of (Enter your answer as a whole number.)
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- Let us consider an economic sector characterized by the following data. The (inverse) demand function is p = 20 -2g with q the quantities produced by the firms in the sector and p the price. The total cost of production for any firm in the sector is: CT(a) = q* - 4g +5 a) First, assume that there is only one firm, firm 1, in the industry. Calculate the price, quantity produced and profit of firm 1 in a monopoly situation that wants to maximize its profit b) Firm 1 seeks to deter the entry of another firm, firm 2, into its market through a sustainable monopoly strategy. Calculate the equilibrium price, quantity and profit of firm 1 given this strategyConsider a set of 1000 companies operating in a competitive market. The supply curve for this market is given by O = 20+2P and the demand curve is given by D = 280-4P, where quantity Q is measured in millions of tons and Price P is measured in monetary units. Considering that the marginal cost of the individual firm is given by 2Q, the quantity Q being measured in thousands of tons, we ask: a) Sketch the market equilibrium and the equilibrium of an individual firm. b) What is the situation of this market at that particular moment. c) Make considerations about the long-run equilibrium trend of this market.Suppose a typical (representative) corn farm has a short run production technology which results in the outcome of U-shaped Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC). Further, suppose this firm sells its product in a market where the price of the good is determined by the interaction of market Demand and Supply. Because an individual firm is very small compared to the rest of the market, we treat the market price as the price given to the firm, and the individual firm cannot impact that price. assume we are in the Short Run for this firm. In graphing, put $ on the vertical axis and lower-case q (firm output) on the horizontal axis. Start with the AFC0, AVC0, ATC0, and MC0 curves . show shifts in any of the cost curves, reflecting the higher cost of land (keeping in mind that this higher cost is independent of how much or how little corn is actually produced) and labeling the changed cost curves with a subscript 1. On the graph with $ on the…
- Suppose that there are 100 consumers in a perfectly competitive market and individual demand curves of these consumers are identical. Also, assume that there are 10 firms in the industry and these firms are identical as well. The following information is provided about this competitive market: Individual Demand Curve: P = 100 – 10QD Total Cost of a Representative (individual) Firm: TC = 20Q + (1/6) Q?+ 100 and MC=20+1/3Q a) What is the market demand function? b) What is the market supply function?Two farmers produce milk for local town with local milk demand given by Q=100-1/3P (P denotes price measured in Rands, Q denotes the quantity measured in litres). Both farmers have the same cost function given by TC=150+2q (where q denotes output)a. What output should farmer 1 produce if he or she expects their rival to produce 20 units?Suppose that a competitive firm's marginal cost of producing output q (MC) is given by Assume that the market price (P) of the firm's product is $15. What level of output (q) will the firm produce? The firm will produce units of output. (Enter your response rounded to two decimal places.) What is the firm's producer surplus? Producer surplus (PS) is $ (Enter your response rounded to two decimal places.) Suppose that the average variable cost of the firm (AVC) is given by MC(q)=3+2q. AVC(q)=3+1q. Suppose that the firm's fixed costs (FC) are known to be $50. Will the firm be eaming a positive, negative, or zero profit in the short run? In the short run, the firm's profit will be positive Enter your answer in each of the answer boxes.
- Suppose that the market demand for a product is given by Q= A-P (A> 0). Suppose also that in a competitive industry the typical firm's cost function is given by C(g) = a- (а > 0). 2 (a) Calculate the long-run equilibrium market price P and the output for the typical firm q. (b) Calculate the equilibrium number of firms in the market. (c) Derive, and determine the sign of, dn/dA and dn/da. Explain the signs intuitively.Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q² (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, the short run market supply function is: Qs = 40P if price is greater than $20. Q$ = P/4 if price is greater than $20. Q³ = 2.5P if price is greater than $20. QS = 300-10P for all prices.2. A local business has asked an economic development consultant to help it decide if it can continue to compete with the other businesses in a city's downtown area in a very competitive market. Using historical data on costs, the consultant finds that the total cost function for this business is TC = 10 + Q + .1Q² where Q is amount of output this business produces. Given this TC function, we know that the marginal cost (MC) of production is P = 1+.2Q. a. What are the fixed costs for this business? What is the business's variable cost function? What is the average total cost function? b. Calculate the level of output and the price of a unit of output in long run equilibrium. Sketch a graph of your solution (you do not need to precisely graph the ATC function, you just need to include a plausible version of it). c. Currently, the price of the product is $2.50 because of a recession that has hit the area. The consultant thinks the shop should immediately cease operations. Would you agree…
- COURSE: MICROECONOMICS - Stackelberg ModelIn a given market good there are only 2 firms that satisfy the demand, and their respective total cost functions are: CTi = 400 and the demand that is estimated is P = 120 - 2QIf the exception variable of both firms is the quantity they will produce, such that the decisions to produce are made sequentially firm number 1 will be the leader who decides the quantity to produce and firm number 2 (follower) decides based on the production of firm number 1, we ask:(a) quantity produced by each firm and its equilibrium price in the market.(b) Profit of each company at equilibrium and (c) Graph your resultsSuppose the graph depicts the marginal cost (MC) curves of two profit maximizing Texas cotton farmers, Jesse and Neal. Assume Jesse and Neal sell their cotton in the same competitive market. If the market price is $4 per bale, how many bales of cotton should each farmer produce? Jesse's optimal output: 800 Neal's optimal output: 400 bales MC Neal = MC Jesse MC Neal MC Jesse Price and cost $10- 9 8 7 160 5 4 3 2 0 MC, Neal MC, Jesse 100 200 300 400 500 600 700 800 900 1000 Bales of cottonSuppose market inverse demand function is p(y)=100-Yt where Yt is total production in the market. Assume that there are two firms with following marginal cost MC(firm 1)=Y1 MC(firm 2)=2*Y2+10 Assume that Yt=Y1+Y2 Set up profit function for both firms. What is the best response function of each firm by taking into account action of other firm? What output level is going to be produced by each firm in equilibrium? Assume that Firm 1 is leader in the market and going to act first. What will be the best response and output level of firm 2. What is difference between previous and new situation? Why? What is difference between Bertrand and previous competition? How would you like to find equilibrium price?