Calculate the firm marginal cost and short run supply curve

Assignment Help Macroeconomics

Reference no: EM132192629

Question: A perfectly competitive industry consists of 25 identical firms who compete, each with costs C(q) = 12 + q. Market demand is D(P) = 104 ? P.

i) Calculate the firm marginal cost and short run supply curve q(P). Hint: set MC equal to Price and solve for q.

ii) Construct the industry short run supply curve. Hint: S(p)=nq(P) where n is the number of firms.

iii) Solve for the industry equilibrium price, market quantity, firm quantity and firm profit level.

iv) Solve for the residual demand of a typical firm. Hint: Dr(P) = D(P) - (n - 1)q(P)

v) Calculate the price elasticity of this residual demand for a typical firm in equilibrium.

Reference no: EM132192629

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