Suppose that each firm in a competitive industry has the following costs:Total cost: TC = 50 + 1/2q2Marginal cost: MC = qWhere q is an individual firm’s quantity produced. The market demand curve for the product is:Demand: QD = 120 – PWhere P is the price and Q is the total quantity of the good. Currently there are 9 firms in the market.What is each firm’s fixed cost? What is its variable cost? Give the equation for average total cost.Graph the average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is the average-total-cost curve at its minimum? What is the marginal cost and average total cost at that quantity?Give the equation for each firm’s supply curve.Give the equation for the market supply curve for the short run in which the number of firms is fixed.What is the equilibrium price and quantity for the market in the short run?In this equilibrium, how much does each firm produce? Calculate the firm’s profit and loss. Do firms have incentive to enter or exit?

Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and specify the other subparts you’d like answered. Given, Total cost: TC = 50 + 12q2Marginal cost: MC = q Demand: QD = 120 – P The equation of total cost (TC) is: TC = Fixed cost + variable cost According to the question, TC = 50 + 12q2 …..(i) Therefore, Fixed cost = 50 Variable cost = 12 Average total cost can be computed as: Average total cost = Total costquantity = (50 + 12q2)q= 50q+12q The average-total-cost curve and the marginal-cost curve are graphed below: The average cost is minimum at that point where average variable cost intersects marginal cost. In the diagram, MC cuts AC at quantity 10. Therefore, the AC is minimum at the quantity of 10. At this quantity both MC and AC is 10.The supply curve shows the association between the price of commodity and quantity of the commodity that a seller is able and willing to sell. The firms supply curve is represented by the rising portion of marginal cost. Therefore, the equation of supply curve is as follows: Supply curve = q

Answered: Suppose that each firm in a competitive…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that each firm in a competitive industry has the following costs:

Total cost: TC = 50 + 1/2q2

Marginal cost: MC = q

Where q is an individual firm’s quantity produced. The market demand curve for the product is:

Demand: QD = 120 – P

Where P is the price and Q is the total quantity of the good. Currently there are 9 firms in the market.

What is each firm’s fixed cost? What is its variable cost? Give the equation for average total cost.
Graph the average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is the average-total-cost curve at its minimum? What is the marginal cost and average total cost at that quantity?
Give the equation for each firm’s supply curve.
Give the equation for the market supply curve for the short run in which the number of firms is fixed.
What is the equilibrium price and quantity for the market in the short run?
In this equilibrium, how much does each firm produce? Calculate the firm’s profit and loss. Do firms have incentive to enter or exit?

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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