MICROECONOMICS
MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
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Chapter 13, Problem 1IP
To determine

Output decision of perfectly competitive firm when it is owned by workers.

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The market for drones is perfectly competitive. Assume for simplicity that fractions of everything, including firms, is possible.  We have identical firms, each with a Total Cost curve of TC=358+q^2 and Marginal Cost curve MC=2q.  Market demand is Q=600-2P.  If the Marginal Cost for every firm decreases by $10 at every quantity, what is the short-run market price?   Hint: first find the number of firms by solving for the original LR equilibrium.
Firms in a perfectly competitive market are said to be “price takers”—that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?
What happens to a competitive firm whose cost function exhibits decreasing marginal cost everywhere? Construct a concrete cost function of this type and carry out the search for the profit-maximizing output.
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