(a)
q | TC | VC | FC | AVC | ATC | MC |
0 | 4 | 0 | 4 | --- | ---- | ---- |
1 | 8 | 4 | 4 | 4 | 8 | 4 |
2 | 10 | 6 | 4 | 3 | 5 | 2 |
3 | 14 | 10 | 4 | 3.33 | 4.67 | 4 |
4 | 20 | 16 | 4 | 4 | 5 | 6 |
5 | 28 | 24 | 4 | 4.8 | 5.6 | 8 |
6 | 38 | 34 | 4 | 5.67 | 6.33 | 10 |
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(b) a perfectly competitive firm produces at P = MC.
P=MC = 8 corresponding to q = 5
Therefore, the quantity produced by each firm is 50 units.
Profit = TR - TC
Profit = pq - TC (TR = Price * Quantity)
Profit = 8 * 5 - 28 (TC at q=5 is 28)
Profit = 40 - 28
Profit = 12
Each firm makes a profit of 12
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(c) An individual's firm will produce q = 5
there are 100 identical firms.
So, the quantity supplied by the market = 100 * 5
quantity supplied by the market = 500
market equilibrium occurs at the point where market supply (Qs) and market demand (Qd) are equal.
Qs = Qd = 500 at P =8
Hence, P = 8 is the short-run equilibrium price.
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(d) In the long run, a perfectly competitive firm produces at P = MC = minimum LRATC
Hence, P = MC = minimum LRATC= 4.
The long-run equilibrium price is 4.
P = MC = 4 corresponding to q = 3.
Hence the quantity produced by each firm in the long run is 3 units.
At P =4, market demand (Qd) is 600
Hence, the quantity produced by the whole industry in the long run is 600
No. of firms = (Market output / each firm output)
No. of firms = 600 / 3
No. of firms = 200
There are 200 firms in the long run.
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(Note: The calculated minimum ATC is 4.67.
But in question, it is given that minimum LRATC is 4.
So I am assuming minimum ATC is 4 instead of 4.67 at q = 3.
So that MC = minimum LRATC = 4 at q =3)
please answer ASAP please help A perfectly competitive industry is composed of 100 identical firms with...
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