Question

In: Economics

Market demand for certain product, QD = 900p-1 . Each firm’s production function ?? = ??...

Market demand for certain product, QD = 900p-1 . Each firm’s production function ?? = ?? 0.5 . Suppose the price of labor is w = 2.

(a) Suppose there is only one firm in the market. Derive the firm’s supply curve and solve for the competitive equilibrium price and quantity. Calculate the firm’s profit.

(b) Now, suppose that there are two firms, whose output levels are denoted by q1 and q2. Solve for the competitive equilibrium price and quantities produced by each firm. Compare the results with part (a).

Solutions

Expert Solution

Given,

QD = 900p-1

qi = Li = 0.5

Suppose the price of labor is W = 2.

a) Derive the firm's supply curve and solve for the competitive equilibrium price and quantities.

Calculate the firm's profit.

We know that,

W/P = MP​​​​​​L

It is the marginal product of labor.

b) Now suppose that there are two firms whose output levels are denoted by q1 and q2 .

To solve:

The competitive equilibrium price and quantities produced by each firm.

p = 42.42

Q = 900/ 42.42

Q = 21.21

Here due to increase the number of firm price of each firm is lower compose to in one part a. But equilibrium quantity is higher as more as spelling market.


Related Solutions

The market demand function for corn is               Qd = 25 - 2P The market...
The market demand function for corn is               Qd = 25 - 2P The market supply function is                 Qs = 5P -3 both measured in billions of bushels per year. What would be the welfare effects of a policy that put a cap of $3.50 per bushel on the price farmers can charge for corn? (Assume that corn is purchased by the consumers who place the highest value on it.) Instructions: Round quantities to one decimal place....
The market demand function for corn is               Qd = 28 - 2P The market...
The market demand function for corn is               Qd = 28 - 2P The market supply function is                 Qs = 5P -4 both measured in billions of bushels per year. What would be the welfare effects of a policy that put a cap of $4.00 per bushel on the price farmers can charge for corn? (Assume that corn is purchased by the consumers who place the highest value on it.) Instructions: Round quantities to one decimal place....
Demand is given by QD= 250 –2P and a firm’s cost function is C = 5Q...
Demand is given by QD= 250 –2P and a firm’s cost function is C = 5Q + Q2. (a) If this industry is a monopoly, what is the profit maximizing quantity? What is price? How much total surplus is generated? (b) If this is a perfectly competitive industry with a cost structure equivalent to the monopoly (i.e., there is a large number of firms, the sum of whose marginal cost curves is equal to the monopolist’s marginal cost curve), what...
The market demand curve is P = 90 − 2Q, and each firm’s totalcost function...
The market demand curve is P = 90 − 2Q, and each firm’s total cost function is C = 100 + 2q2.1. Suppose there is only one firm in the market. Find the market price, quantity, and the firm’s profit.2.Show the equilibrium on a diagram, depicting the demand function D (with the vertical and horizontal intercepts), the marginal revenue function MR, and the marginal cost function MC. On the same diagram, mark the optimal price P, the quantity Q, and...
he market demand function for corn is               Qd = 25 - 2P The market...
he market demand function for corn is               Qd = 25 - 2P The market supply function is                 Qs = 5P -3 both measured in billions of bushels per year. What would be the welfare effects of a policy that put a cap of $3.50 per bushel on the price farmers can charge for corn? (Assume that corn is purchased by the consumers who place the highest value on it.) Instructions: Round quantities to one decimal place....
Suppose the demand function for the product is Qd = 65,800 – 1,200P and the supply...
Suppose the demand function for the product is Qd = 65,800 – 1,200P and the supply function is Qs = 4,000P – 20,000. Suppose also that there is a price floor of 20 dollars. Using a graph similar to question 3 and the information provided, what is the deadweight loss (DWL) in the economy? A.DWL = $10,500 B. DWL = $9,555 C. DWL = $11,555 D.DWL = $12,000
The market demand curve is P = 90 − 2Q, and each firm’s total cost function...
The market demand curve is P = 90 − 2Q, and each firm’s total cost function is C = 100 + 2q2. 1. Suppose there is only one firm in the market. Find the market price, quantity, and the firm’s profit. 2.Show the equilibrium on a diagram, depicting the demand function D (with the vertical and horizontal intercepts), the marginal revenue function MR, and the marginal cost function MC. On the same diagram, mark the optimal price P, the quantity...
The market demand curve is P = 90 − 2Q, and each firm’s total cost function...
The market demand curve is P = 90 − 2Q, and each firm’s total cost function is C = 100 + 2q 2 . (d) (2 points) Verify that the monopoly price and quantity satisfy the monopolist’s rule of thumb for pricing. (e) (3 points) What is the monopolist’s factor markup of price over marginal cost? (f) (4 points) How does the monopolist’s factor markup of price over marginal cost compare to that of a perfectly competitive firm?
1. Suppose the inverse demand function for a monopolistically competitive firm’s product is given by ?...
1. Suppose the inverse demand function for a monopolistically competitive firm’s product is given by ? = 100 − 2? and the cost function is given by ?? = 52 + 4? 1. Determine the profit-maximizing price and quantity 2. Determine the maximum profits. 3. Can we say that this firm is operating in the long-run or short-run equilibrium at the equilibrium price and quantity? 2. Suppose the inverse demand for a monopolist’s product is given by ? = 110...
1. Consider a monopolist facing the market demand function be QD = 200 -5P. Suppose that...
1. Consider a monopolist facing the market demand function be QD = 200 -5P. Suppose that this firm has constant average and marginal costs = $4 per unit produced. a. Find the profit-maximizing level of Q and P, presuming the monopolist simply charges the same price to all of its customers
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT