4. Suppose that you estimate the following cost function for your company, which is a firm...
4. Suppose that you estimate the following cost function for your company, which is a firm operating in a perfectly competitive market:
TC=100Q-4Q2+Q3
The market demand and supply equations are as follows.
QD=134-3P+2Y
QS=24+2P-2PI
where Y= Income = 100 and PI = Price of inputs = 120.
a. Compute and plot the average cost and marginal cost.
b. Over what range of output does economies of scale exist? Diseconomies of scale?
c. How many units of output will you produce and what price will you charge for each unit?
d. Is the company making a profit or loss at the suggested output level? How much?
Homework Answers
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4. Suppose that you estimate the following cost function for
your company, which is a firm...
1. For a perfectly competitive firm, long-run average cost is: LAC = 300 - 20Q +...
1. For a perfectly competitive firm, long-run average cost is: LAC = 300 - 20Q + 1.8Q2, where Q denotes the firm’s output. The firm’s long-run profit-maximizing price is _____. 2. Demand for a good is given by: QD = 50 – 2P and supply by QS = 1P – 10, where P is the market price of the good. In equilibrium, price would be ___. 3. Demand for a good is given by: QD = 50 – 2P and...
1) The above figure definitely shows a) a long-run equilibrium for a monopolistically competitive firm. b)...
1) The above figure definitely shows
a) a long-run equilibrium for a monopolistically competitive
firm.
b) an industry with few firms.
c) a long-run equilibrium for a perfectly competitive firm.
d) a long-run equilibrium for a perfectly competitive market.
2) The firm in the above figure has a markup of ________ per
meal.
a) $0
b) $4
c) $8
d) $10
3) According to the graph bellow:
Q1 to Q2 // Q2 to Q3 // Q4 to Q5
a) The...
Question 4 Consider the Sunshine Company, a perfectly competitive firm with the following cost function TC...
Question 4 Consider the Sunshine Company, a perfectly competitive firm with the following cost function TC 12006Q + 202 where Q is the firm's output per day. a) Find the firm's marginal cost function. [2 marks] C b) If the price of Sunshine's product equals $66, how many units per day should the firm produce? [4 marks] c) Find the firm's average variable cost function. [3 marks] d) Is average variable cost at the quantity you calculated in part b)...
22. Which of the following is true for a firm that enjoys economies of scale? a. Marginal cost is increasing as output i...
22. Which of the following is true for a firm that enjoys economies of scale? a. Marginal cost is increasing as output increases. b. Average total cost is falling as output increases. c. Marginal cost is constant as output increases. d. Marginal revenue is falling as output increases. 23. The figure below shows short-run average total cost curves for a firm under four different production technologies. Assume that there are only four different technologies that the firm could use. Refer...
Which of the following statements is accurate? Select the correct answer below: A. when the long-run...
Which of the following statements is
accurate?
Select the correct answer below:
A. when the long-run average cost (LRAC)
decreases as output increases, a firm is experiencing diseconomies
of scale.
B. when the long-run average cost (LRAC)
increases as output increases, a firm is experiencing diseconomies
of scale.
C. when the long-run average cost (LRAC)
increases as output increases, a firm is experiencing economies of
scale.
D. when the long-run average cost (LRAC)
decreases as output increases, a firm is...
7. A bicycle company has the following long run total cost function: LTC(Q) = 40,000Q –...
7. A bicycle company has the following long run total cost function: LTC(Q) = 40,000Q – 400Q2 + 203 where Q is the number of bikes produced. a. Compute the company's LMC and LAC as a function of Q b. Assume that that there is perfect competition. How many bikes would the bicycle company produce in the long run? c. Over what range of output does the company experience economies of scale? Over what range of output does it experience...
Suppose you are given the following information about a particular industry in the short run (perfect...
Suppose you are given the following information about a particular industry in the short run (perfect competition): QD = 200 − 2P Market demand QS = −120 + 6P Market supply C(q) = 4 + 30q + q2 Firm total cost function for an individual firm (10 pts) Find the equilibrium price & quantity in the market in the short run. (20 pts) Find the output supplied by the individual firm, and the number of firms in...
You are the manager of a small company that operates in a perfectly competitive market. You...
You are the manager of a small company that operates in a perfectly competitive market. You observe that the number of firms in the market has increased intensifying competition. You believe that this trend may continue until next year because several foreign companies have expressed interest entering the U.S. market. Concerned by the changing market conditions, you decided to examine the degree of profitability of your business next year. You hired an economist to estimate the market demand and supply...
suppose a competitive firm has the following cost: Q 0 1 2 3 4 5 6...
suppose a competitive firm has the following cost: Q 0 1 2 3 4 5 6 7 8 9 TC ($) 50 54 62 74 90 110 134 162 194 230 (Q: output ; TC: total cost) 1 Assume market price is $12 how much should the firm produce to maximize profit? 2 How much profit will it earn at $12? 3 Assume market price is $28, how much should the firm produce to maximize profit? 4 How much profit...
[1] A perfectly competitive aluminum producer is currently producing a quantity where the market price is...
[1] A perfectly competitive aluminum producer is currently producing a quantity where the market price is $0.67 per pound (i.e., 67 cents per pound), average total cost is $0.70, and average variable cost of $0.60 (which corresponds to the minimum point on the average variable cost curve). Would you recommend this firm expand output, contract output, or shut down in the short-run? Provide a graph to illustrate your answer. [2] Suppose the local crawfish market is perfectly competitive, with the...
1) The above figure definitely shows
a) a long-run equilibrium for a monopolistically competitive
firm.
b) an industry with few firms.
c) a long-run equilibrium for a perfectly competitive firm.
d) a long-run equilibrium for a perfectly competitive market.
2) The firm in the above figure has a markup of ________ per
meal.
a) $0
b) $4
c) $8
d) $10
3) According to the graph bellow:
Q1 to Q2 // Q2 to Q3 // Q4 to Q5
a) The...
Question 4 Consider the Sunshine Company, a perfectly competitive firm with the following cost function TC 12006Q + 202 where Q is the firm's output per day. a) Find the firm's marginal cost function. [2 marks] C b) If the price of Sunshine's product equals $66, how many units per day should the firm produce? [4 marks] c) Find the firm's average variable cost function. [3 marks] d) Is average variable cost at the quantity you calculated in part b)...
Which of the following statements is
accurate?
Select the correct answer below:
A. when the long-run average cost (LRAC)
decreases as output increases, a firm is experiencing diseconomies
of scale.
B. when the long-run average cost (LRAC)
increases as output increases, a firm is experiencing diseconomies
of scale.
C. when the long-run average cost (LRAC)
increases as output increases, a firm is experiencing economies of
scale.
D. when the long-run average cost (LRAC)
decreases as output increases, a firm is...
7. A bicycle company has the following long run total cost function: LTC(Q) = 40,000Q – 400Q2 + 203 where Q is the number of bikes produced. a. Compute the company's LMC and LAC as a function of Q b. Assume that that there is perfect competition. How many bikes would the bicycle company produce in the long run? c. Over what range of output does the company experience economies of scale? Over what range of output does it experience...
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