+1-415-670-9189
info@expertsmind.com

# Get Solution

What is the equilibrium price, market quantity
Course:- Microeconomics
Reference No.:- EM13950466

 Tweet Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Microeconomics

Fixed cost for a firm is given by FC = 400 and variable cost is given by VC = 5q + 1⁄4q2, where q is the output level of the firm in a given period. Therefore marginal cost for the firm is given by MC = 5 + 1⁄2q (those of you who know calculus can confirm this - MC is the first derivative of VC with respect to q).

a) Derive an expression for average variable cost (AVC). Graph MC and AVC up to q = 80. Assuming that the firm is a price-taker operating in a competitive market, derive an expression for the firm's supply curve, (ie. the profit maximizing output for the firm as a function of the market price). What is the shut-down price for this firm (ie. what is the price at or below which the firm chooses to produce zero)?

b) What does the MC curve tell us about the marginal product (MP) of the firm's variable factor of production (presumably labour)?

c) Derive an expression for average total cost (ATC). At what quantity is ATC at its minimum (at what ATC level)? In your diagram, sketch ATC and confirm that it is U-shaped. [Hint: Calculate ATC when q=20 and q= 80.]

d) Assuming that there are 150 identical firms operating in this competitive industry, what is the equation of the industry supply curve? If the demand curve is given by Q = 4500 - 100P, what is the equilibrium price, market quantity?

e) Given your answers from the previous part, what is the output level of each firm? Calculate and illustrate in your diagram the profit level for the firm? Is this a long run equilibrium? Explain.

f) Assuming that the minimum point of the short run ATC curve for all firms is also the minimum point of the long rung average cost curve (LRAC) what is the long run equilibrium price? What is the long run equilibrium market quantity and quantity per firm? How many firms are there in the long run equilibrium?

Minimize

Ask Question & Get Answers from Experts
Browse some more (Microeconomics) Materials
 In the model of perfect competition all firms are price-takers since they treat price as a market-determined constant. Firm Perfcomp's total revenue function is TR(Q)=P*Q in Assume a firm with the production function Q = AKα Lβ . Show that α is the output elasticity of labor, EQL , and β is the output elasticity of capital, EQK . Develop a Billing and Collection Policy for a physician practice. You must effectively develop a thorough policy for use within the practice by practice employees and a thor In early 2008. You purchased and remodeled a 120-room hotel to handle the increased number of conventions coming to town. By mid-2008, it became apparent that the recession wo 1)Draw a set of indifference curves relating two “bads” such as smog and garbage. What characteristics do these curves have? An airline offering flight services from Singapore to Bangkok, Thailand, has two classes of seats, business class and economy class. Calculate the price elasticity of demand An experimental composite engine block for an automobile will trim 20 pounds of weight compared with a traditional cast iron engine block. It is estimated that at least \$2,500 Find Louis' optimal consumption bundle of orange juice and pineapple juice each week. Suppose the price of pineapple juice rises to \$2 a cup while the price of orange juice