Question

Suppose the market for allergy medicine is perfectly competitive, despite the presence of only 4 firms producing and selling allergy medicine. The demand for allergy medicine is Qd = 100 - p, where Qd is the total number of allergy medicine bottles demanded in the market, measured in thousands per year, and p is the price of a bottle of allergy medicine, measured in dollars per bottle. Each firm has a total cost function of $LaTeX: C\left(q\right)=\frac{q^2}{2}+50$ , where q is the firm's production in thousands of bottles and cost is measured in dollars. Given this, each firm's marginal cost is MC = q. How much economic profit does each firm earn in equilibrium?

Answer 1

So o=4P C = qe so MC: с 24 - 1 P=2 Masket supply: 4q = 40 At equilibrium: Demand= supply loop P=20 Q = 4(20) = 80 Each firm produces - 80=20 Each firm's economic prosit = 20x20 - = Iso = 4P