Question

5a. Suppose that any given individual firm in this same perfectly competitive industry has the following:
?? = 0.6?3 − 1.9?2 + 5? + 30

??? = 0.6?2 − 1.9? + 5 + 30/?

?? = 1.8?2 − 3.8? + 5

Also, assume the market price is P* = 10.

Find the quantity that the individual firm would produce at this price. Round your answer to the nearest
whole number. Show work. You will have to use the quadratic formula.

5b Using your rounded quantity, what is the short-run profit or loss earned by a typical firm in this industry
at this market price? Don’t round your profit answer. Show work

6. Draw a graph showing this single firm (the ATC and MC functions) and its profit or loss. To do this, you
will also have to show the price, quantity chosen by the firm, and the average costs of production at that
output level. Label everything clearly.

Answer 1

5a. For a perfectly competitive market, the firm would produce where or or . The solution of this quadratic equation would be as

or

or

or

or , and since q can't be negative, we have

.

5b. The profit would be as or , and at the profit maximizing quantity, we have or or , ie a loss of 14.1.

6. The graph is as below.