Question

Suppose that each firm in a competitive industry has the following costs:

Total Cost:	TC= 50+1/2 q^2
Marginal Cost:	MC= q

where qq is an individual firm's quantity produced.

The market demand curve for this product is

Demand

QD=160−4PQD=160−4P

where PP is the price and QQ is the total quantity of the good.

Each firm's fixed cost is $_____

What is each firm's variable cost?

q

50+1/2 q

1/2q

1/2q^2

Which of the following represents the equation for each firm's average total cost?

50/q

50+1/2q

50/q+1/2q

1/2q

Complete the following table by computing the marginal cost and average total cost for qq from 5 to 15.

Answer just this past please

The average total cost is at its minimum when the quantity each firm produces (qq) equals _______

.

Which of the following represents the equation for each firm's supply curve in the short run?

q

50−q

1/2q^2

120−1/2q^2

In the long run, the firm will remain in the market and produce if _______.

Currently, there are 16 firms in the market.

In the short run, in which the number of firms is fixed, the equilibrium price is______

and the total quantity produced in the market is_____units. Each firm produces____

units. (Hint: Total supply in the market equals the number of firms times the quantity supplied by each firm.)

In this equilibrium, each firm makes a profit of $______

. (Note: Enter a negative number if the firm is incurring a loss.)

Firms have an incentive to _____ the market.

In the long run, with free entry and exit, the equilibrium price is _____

, and the total quantity produced in the market is_____units. There arefirms in the market, with each firm producing____

units.

Answer 1

Each firm's fixed cost is $ 50

each firm's variable cost:

1/2q^2

each firm's average total cost:

50/q+1/2q

Q	MC	ATC
5	5	12.50
6	6	11.33
7	7	10.64
8	8	10.25
9	9	10.06
10	10	10.00
11	11	10.05
12	12	10.17
13	13	10.35
14	14	10.57
15	15	10.83

The average total cost is at its minimum when the quantity each firm produces (q) equals 10 (where MC = ATC)

the equation for each firm's supply curve in the short run:

q

In the long run, the firm will remain in the market and produce if P > = 10 (firm makes a profit)

Currently, there are 16 firms in the market.

In the short run, in which the number of firms is fixed :

Total supply (16 x q) = 16P , Demand = 160 - 4P

the equilibrium price is = 8 (Demand = Total Supply)

and the total quantity produced in the market is = 16 x 8 = 128 units.

Each firm produces 8 units.

In this equilibrium, each firm makes a profit of = TR - TC = 8 x 8 - 50 - 8²/2 = - $ 18

Firms have an incentive to exit the market.

In the long run, with free entry and exit, the equilibrium price is = $ 10 (P = min ATC)

, and the total quantity produced in the market is= 160 - 4 x 10 = 120 units.

There are 12 firms in the market, with each firm producing = 10 units.