Calculation of profit maximizing output level

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The following table fives quantity supplied and quantity demanded at various prices in the perfectly competitive meat packing markets:

Prices (per lb.)

Qs

Qd (in millions of lbs.)

$1

10

100

$1.25

15

90

$1.50

25

75

$1.75

40

63

$2.00

55

55

$2.25

65

40

Assume that each firm in the meat-packing industry faces the following cost structure:

Pounds

TC

60,000

$110,000

61,000

$111,000

62,000

$112,000

63,000

$115,000

1. What is the profit maximizing output level for the typical firm? (Hint: Calculate MC for each change in output, then find the equilibrium price, and calculate MR for each change in output)

2. Is this market in long-run equilibrium? Why or why not? ( Hint: Calculate ATC)

3. What do you expect to happen to the number of meat packing firms over the long run? Why?

 

Reference no: EM1315732

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