Question

Short-Kun local action Quantity Produced 0 Total Cost in dollars) 29 38 م ده دا | ها 53 _ 95 6. The table above gives the short-run total cost functie al cost function for a typical firm in a perfectly competitive industry. (a) What is the dollar value of the firm's total fixed cost? (b) Calculate the marginal cost of producing the fourth unit of output (c) If the price the firm receives for its product is $20, indicate the tu output and explain how you determined your answer. is $20, indicate the firm's profit-maximizing quantity of (d) Given your results in part (c), explain what will ha run. (c), explain what will happen to the number of firms in the industry in the long (e) Assume that this firm operates in a constant-cost ing government imposes a per-unit tax of $2. indicate what in the long run. operates in a constant-cost industry and has reached long-run equilibrium. If the mposes a per-unit tax of $2, indicate what will happen to the firm's profit-maximizing output Sin a constant-cost perfectly competitive orange market. Ow Orchard 7. Ow Orchard grows oranges and operates in a constant-cost perfectly competitive orange is currently in long-run equilibrium. (a) Draw correctly labeled side-by-side graphs for both the orange market and Ow Orchard. Show each of the following ( Industry equilibrium price and quantity, labeled P., and respectively (1) Ow Orchard's equilibrium price and quantity, labeled P, and Q, respectively (b) Now assume that the government provides farm support to orange growers by granting an annual lump-sum subsidy to all orange growers. Indicate the effect the subsidy.would have on each of the following in the short run. (1) Ow Orchard's quantity of output. Explain. (ii) Ow Orchard's profit (ii) The number of firms in the industry. (c) Indicate how each of the following will change in the long run as a result of the lump-sum subsidy (0) The number of firms in the industry. Explain. (i) Price (ii) Industry output

Answer 1

Q6) a) FC = when Production is at zero level

FC = $ 20

.

B) MC of fourth unit = TC of 4 units - TC of 3 units

= 72-53

= $ 19

c)

Q	TC	TR = 20*Q	π= TR - TC
0	20	0	-20
1	27	20	-7
2	38	40	2
3	53	60	7
4	72	80	8
5	95	100	5
6	122	120	-2

Max π , when Q = 4,

so produce 4 units

d) as in Short run, existing firms are earning positive profit,so in long run, new firms will enter the industry, bcoz they are incentivized to enter , in order to earn profits

.

its mandatory to answer only first four parts of the first question posted