Briefly discuss a strategy a firm operating in a perfectly competitive market must take to sustain...

Briefly discuss a strategy a firm operating in a perfectly competitive market must take to sustain its profit outlook.
A firm operating in a competitive market has the following cost function C = 10 + 2Q². The market demand is Q = 40 – 2P and equilibrium price of output is $20.

Calculate the output the firm must produce to maximize its profits.
Find the price the firm must charge to maximize profits.

Expert Solution

a. As profit maximising condition in perfect competition is MR=MC where MR is the marginal revenue and MC is the marginal cost. Now as long as Marginal revenue generated from selling an additional unit is greater than the marginal cost that firm incurs by selling an additional unit, the firm should expand production to keep on earning positive profit. Whenever MR becomes equal to MC, it gives a signal that increasing production beyond this level will cause Marginal cost to be greater than marginal revenue and firms start facing economic losses.

Rahul Sunny answered 6 months ago

You are working for a firm that is operating in a perfectly competitive market, and exhibits...

You are working for a firm that is operating in a perfectly competitive market, and exhibits a cost function of TC = 4000 +500 Q – 2 Q2 + 0.02Q3. If the market equilibrium price is $515, should you operate? If so, what is the Profit? If the market price is $455, should you operate? Why? Finally, what is the price that would have you shutdown, layoff labor, and leave the plant idle in the short-run?

A firm is operating in the perfectly competitive market for gummy bears. It faces the following...

A firm is operating in the perfectly competitive market for gummy bears. It faces the following conditions: TC(q)=4+ (q2/16 ) MC(q)=q/8 Market Demand: D(P)=1008-200P Please answer the following questions. Suppose market price is currently at $2. a) What is the profit maximizing quantity for the firm to produce at? b) What is the profit for the firm at the profit maximizing quantity? c) If all firms are identical to this firm, how many firms must there be in the market?...

You are operating a firm in a perfectly competitive market. In the short run, you have...

You are operating a firm in a perfectly competitive market. In the short run, you have fixed costs of $30. Your variable costs are given in the following table: Q VC 0 0 1 100 2 150 3 180 4 220 5 300 6 390 If the market price is $56, what is the profit-maximizing level of output?

Firm X, operating in a perfectly competitive market, can sell as much or as little as...

Firm X, operating in a perfectly competitive market, can sell as much or as little as it wants at the market price. The firm’s cost function is C(Q) = 600 + 8Q + 6Q 2 . a. At a market price of $140 per unit, what is the firm’s profit maximizing quantity? What is their profit? b. At a market price of $80 per unit, will the firm stay in business in the short-run? If so, what quantity would they...

The short-run supply curve for an individual firm operating in a perfectly competitive market is: a....

The short-run supply curve for an individual firm operating in a perfectly competitive market is: a. the marginal cost curve at or above the average total cost curve. b. the marginal cost curve at or above the average variable cost curve. c. the marginal revenue curve at or above the average total cost curve. d. the marginal revenue curve at or above the average variable cost curve.

Firm Z, operating in a perfectly competitive market, can sell as much or as little as...

Firm Z, operating in a perfectly competitive market, can sell as much or as little as it wants of a good at a price of $16 per unit. Its cost function is C = 50 + 4Q + 2Q2. (a) Determine the firm’s profit-maximizing level of output. Compute its profit. (b) The industry demand curve is QD = 200 - 5P. What is the total market demand at the current $16 price? If all firms in the industry have cost...

The following information is relevant for an individual firm operating in a perfectly competitive market. Output...

The following information is relevant for an individual firm operating in a perfectly competitive market. Output 30 Variable Cost $800 Fixed Cost $1,200 Marginal Cost $60 Price $60 What will be the firm's production decision in the short-run? Exit Shutdown Other firms will enter into the market Operate A fixed cost is a cost that: exists only in the long-run. does not vary with output. changes based on the number of workers. varies with output. True or False: A reason...

An individual firm in a perfectly competitive market

An individual firm in a perfectly competitive marketSelect one:a. is very concerned with its competitors' marketing decisions.b. cannot affect market price.c. may be able to increase its price without losing sales.d. will decrease the price of its output if it produces too much.

1. Let’s assume you’ve opened a firm in a perfectly competitive market to take advantage of...

1. Let’s assume you’ve opened a firm in a perfectly competitive market to take advantage of an opportunity. Model your firm when you’ve just entered the market. Next, model it as it will inevitably end up. What has happened to your firm and investment? Is this a good thing, bad thing, or just a thing, and for whom? Using your analysis, explain why? 2. Use marginal analysis to show that you will maximize profits for your firm: P Q TR...

Consider a representative firm operating in the perfectly competitive market for apples. Suppose the Government applies...

Consider a representative firm operating in the perfectly competitive market for apples. Suppose the Government applies a per unit subsidy on the goods sold (all else unchanged). In the long run, the number of firms in the market will remain the same, but each firm will increase its production.

Question