Question

Suppose a firm operates in a perfectly competitive market where every firm has the same cost function given by:

C(q)=5q²+q+20

Suppose initially the market price is p=31.

How much output will this firm produce?

At the price p=31, how much profit does this firm make?

Now suppose the market price changes. Below what price will this firm shut down? (what is the "shut-down price")

At what price will this firm earn zero profits (what is the "break-even price")?

Suppose the market consists of 20 firms. The market demand is Q_D=602-2p. What will be the short-run equilibrium price?

Suppose the market consists of 20 firms. The market demand is Q_D=602-2p.

What will be the short-run equilibrium output per firm?

Continuing with the previous question:

Suppose the market consists of 20 firms. The market demand is Q_D=602-2p.

What will be the short-run equilibrium market quantity?

Continuing with the previous question:

Suppose the market consists of 20 firms. The market demand is Q_D=602-2p.

In the long run, what do you expect to happen to the number of firms in the industry, the market price, margkey quantity, and output per firm?

Number of firms will             ["", "", ""]                      [ Select ]decreasestay the sameincrease

Market price will             ["", "", ""]                      [ Select ]stay the sameincreasedecrease

Market quantity will             ["", "", ""]                      [ Select ]stay the sameincreasedecrease

Output per firm will             ["", "", ""]                      [ Select ]increasestay the samedecrease

Sandboxes are produced according to the following cost function:

c(q) = q² + 100

where the fixed cost of 100 represents an annual license fee the firms pay. Every firm uses the same technology to produce sanboxes.

In the long run, what will be the equilibrium price?

The market demand for sandboxes is given by Q_D = 1500 – 5p. Find the long-run equilibrium market quantity.

The market demand for sandboxes is given by Q_D = 1500 – 5p. Find the long-run equilibrium number of firms.

Recent trends have increased the demand to Q_D=2250–5p. In the short run, what will be the new equilibrium price? (Note: you will need to use the number of firms you found in the previous question to find this)

Suppose demand remains high at QD=2250–5p in the long run.

What will be the long-run equilibrium price?

Suppose demand remains high at Q_D=2250–5p in the long run.  

What is the number of firms operating in the long run?

Suppose the operating fee is increased from 100 to 225. So now each firm has the cost function

C(q)=q² + 225

In the long run, with the demand Q_D=2250–5p, what will be the equilibrium price?

How did raising the operating fee from $100 to $225 affect the firm's profits in the long run? (compare the profits in the previous question to to the profits in the first question in this story).

Group of answer choices

It decreased from >0 to =0

it stayed the same as is =0

it decreased from 0 to <0

it increased from 0 to >0

it stayed the same and is >0

Answer 1