Consider a perfectly competitive market where the market demand curve is p(q) = 1000-q. Suppose there...

Consider a perfectly competitive market where the market demand curve is p(q) = 1000-q. Suppose

there are 100 firms in the market each with a cost function c(q) = q² + 1.

(a) Determine the short-run equilibrium.

(b) Is each firm making a positive profit?

(c) Explain what will happen in the transition into the long-run equilibrium.

(d) Determine the long-run equilibrium.

Expert Solution

Rahul Sunny answered 2 years ago

Consider a perfectly competitive market where the market demand curve is given by Q = 76−8P...

Consider a perfectly competitive market where the market demand curve is given by Q = 76−8P and the market supply curve is given by Q=−8+4P. In the situations (d), determine the following items (i-viii) (d) A market with price ceiling C = 5. i) The quantity sold in the market. ii) The price that consumers pay (before all taxes/subsidies). iii) The price that producers receive (after all taxes/subsidies). iv) The range of possible consumer surplus values. v) The range of...

A perfectly competitive market exists for wheat. The inverse demand is P = 100-Q where P...

A perfectly competitive market exists for wheat. The inverse demand is P = 100-Q where P is the price of wheat and Q is the total quantity of wheat. The private total cost for the unregulated market to produce a quantity of Q is 50+80Q +0.5Q^2. The production of wheat creates some pollution where the total externality cost is EC =Q^2. Task 1: Solve for the free market competitive equilibrium of wheat. Task 2: Solve for the socially optimal level...

A perfectly competitive market exists for wheat. The inverse demand is P = 100?Q where P...

A perfectly competitive market exists for wheat. The inverse demand is P = 100?Q where P is the price of wheat and Q is the total quantity of wheat. The private total cost for the unregulated market to produce a quantity of Q is 50+80Q +0.5Q 2 . The production of wheat creates some pollution where the total externality cost is EC = Q 2 . Task 1: Solve for the free market competitive equilibrium of wheat. Task 2: Solve...

Suppose the demand and supply curves of a perfectly competitive market are: Supply: Q = P...

Suppose the demand and supply curves of a perfectly competitive market are: Supply: Q = P - 10 Demand: Q = 90 - P (1) Solve for the market equilibrium (price and quantity at equilibrium) (2) Solve for Welfare (Total Surplus). (3) Suppose a per-unit tax of $10 is imposed in the market. Calculate tax revenue and deadweight loss.

1. Consider a Perfectly Competitive market where the demand is given by P = 6000 –...

1. Consider a Perfectly Competitive market where the demand is given by P = 6000 – 4Q and the supply is given by P = Q. a. Calculate the equilibrium price, quantity, total Consumer Surplus, and total Producer Surplus. Show all calculations. b. Suppose this market now is controlled by a single-price monopolist whose marginal cost function is MC = Q. Determine this firm’s marginal revenue function, then calculate its profit-maximizing quantity, price, the total Consumer Surplus, and the total...

Consider three Perfectly Competitive market scenarios. The market demand curve is given by P = 100...

Consider three Perfectly Competitive market scenarios. The market demand curve is given by P = 100 – Q where P is the market price and Q is the market quantity. In the first scenario, the market supply function is P = $50. In the second, the market supply function is P = Q, and in the third, the market supply function is Q = 50. For each scenario, draw the appropriate graph; then calculate the equilibrium price and quantity, the...

Consider the perfectly competitive market for dogs. Suppose that the demand curve for dogs is given...

Consider the perfectly competitive market for dogs. Suppose that the demand curve for dogs is given by MBP = P = 200 - Q, and the supply curve for dogs is given by MCP = P = 40 + Q. (6 points) How many dogs are bought and sold at equilibrium? (6 points) Suppose, to begin with, that dog buying and selling only affects parties that engage in it (i.e., buyers and sellers of dogs). How does the social marginal...

Demand in a perfectly competitive market is Q = 100 - P. Supply in that market...

Demand in a perfectly competitive market is Q = 100 - P. Supply in that market is Q = P - 10. (i) If the government imposes a $10 per unit sales tax, what is the consumer price, seller price, and quantity? (ii) Once the government imposes the tax, how much consumer surplus, producer surplus, and dead-weight loss is there?

The market demand curve is P = 260 – Q, where Q is the output of...

The market demand curve is P = 260 – Q, where Q is the output of Firm 1 and Firm 2, q1 + q2. The products of the two firms are identical. a. Firm 1 and Firm 2 have the same cost structure: AC = MC = $20. If the firms are in a competitive duopoly, how much profit does each firm earn? b. Now suppose that Firm 2's production costs increase to AC = MC = $80. If the...

Consider a market with a perfectly elastic demand curve at p∗= 1,763 and a perfectly inelastic...

Consider a market with a perfectly elastic demand curve at p∗= 1,763 and a perfectly inelastic supply curve at q∗= 452. What is the Consumer Surplus? What is the Producer Surplus?

Question