Question

In: Economics

Suppose a producer in the (perfectly competitive) market for golf balls has the following total cost...

Suppose a producer in the (perfectly competitive) market for golf balls has the following total cost
and marginal cost functions, and that market price is $10.
T C = 50 + 0.1q
2
MC = 0.2q

(a) [5 pts] What is the firm’s fixed cost?

(b) [5 pts] Write the equation for the firm’s average total costs.

(c) [5 pts] What is the firm’s marginal revenue?

(d) [15 pts] Graph the market and the firm (making sure to illustrate marginal cost, marginal
revenue, average total cost and average variable cost). Should the firm continue to produce in the short run?

Expert Solution

(a) Total Cost = Fixed Cost + Variable Cost

Fixed cost is independent of the output level

Firm's fixed cost = 50

(b)

Average Total Cost, ATC = TC/q = (50 + 0.1q) / q

ATC = (50/q) + 0.1

(c)

Under perfect competition, MR = p = AR is the demand curve of the firm

MR = 10

(d)

TVC = 0.1q

AVC = TVC/q = 0.1

Since, P > AVC, the firm should continue to operate in the short run.

Rahul Sunny answered 2 years ago

Suppose the total cost of a representative perfectly competitive apple producer is given as tc =...

Suppose the total cost of a representative perfectly competitive apple producer is given as tc = 12 + 6q + q^2$. All apple producers in the market are assumed to be identical. Suppose further that the demand for apples is estimated as qd= 18,000 − 500p and market supply is qs = 2,000 + 500p a. (2 points) Find the equilibrium market price and total supply of apples in the market. b. (4 points) What is the profit maximizing quantity...

The sunflower oil industry is perfectly competitive. Every producer has a following long-run total cost function...

The sunflower oil industry is perfectly competitive. Every producer has a following long-run total cost function given by TC(Q) = 2Q3− 15Q2 + 40Q where Q is measured in tons of sunflower oil. What is the marginal cost for an individual firm? Calculate and graph the long-run average total cost of producing oil that each firms faces for values of Q from 1 to 10. What will the long run equilibrium price of sunflower oil be? How many units of...

Producer Behavior -- Suppose the market for cookies is perfectly competitive. You are producing cookies. The...

Producer Behavior -- Suppose the market for cookies is perfectly competitive. You are producing cookies. The market demand for cookies is ? = 60 − 2?? and its market supply is ? = ??. The total cost for firms to produce cookies is ?? = 50 + 4? + 2? 2 where ? denotes firm-level quantity. a. What is the market equilibrium price? b. How much cookies you should produce to maximize your profit? c. What do you think will...

4. This is the data for a perfectly competitive producer. Output Total Cost 0 100 5...

4. This is the data for a perfectly competitive producer. Output Total Cost 0 100 5 110 10 130 15 170 20 220 25 290 30 380 35 490 A) How much will this firm produce when the price is $ 8? Why? B) How much profit or loss will he make? C)The firm comes to you for advice. Should he shut down? YES? NO? What are you basing your decision on? 5. Based on the data in question 4...

A firm operating in a perfectly competitive market has the following total cost function: TC=0.4Q2+40 There...

A firm operating in a perfectly competitive market has the following total cost function: TC=0.4Q2+40 There are 20 identical firms in the short-run in the market. In addition, the demand function is given by: Q=300-5P a) Find the Supply Function for the Firm in the short-run b) What is the equilibrium price and quantity in the market in the short-run? c) How much does each of the 20 firms produce in the short-run? d) How much profits does each firm...

Suppose that the widget industry is perfectly competitive. Each producer has the long-run average cost function:...

Suppose that the widget industry is perfectly competitive. Each producer has the long-run average cost function: AC(Q)=40-6Q+1/2Q2. The market demand curve for widgets is given by: D(P)=2200-100P. What is the long-run equilibrium price in this industry, at this price how much would and individual firm produce and how many active producers are there in the long-run competitive equilibrium?

A firm operating in a perfectly competitive market has the following total cost function: TC=0.4Q2+40. Its...

A firm operating in a perfectly competitive market has the following total cost function: TC=0.4Q2+40. Its marginal cost function is given by: MC=0.8Q. There are 20 identical firms in the short-run in the market. In addition, the demand function is given by: Q=300-5P a) Find the Supply Function for the Firm in the short-run b) What is the equilibrium price and quantity in the market in the short-run? c) How much does each of the 20 firms produce in the...

A perfectly competitive firm has the following (short-run) total cost function: ??(?)=?2+200 and the market demand...

A perfectly competitive firm has the following (short-run) total cost function: ??(?)=?2+200 and the market demand for the firm’s output is given by ??(?)=300−6?. What is the equilibrium price and how much output will be produced by each firm in the long run? Suppose that the market demand curve now becomes ??(?)=150−6? . In the long run, with this reduced demand, what will be the equilibrium market price and quantity and how many firms will be serving the market and...

Consider the market for ice cream. Suppose that this market is perfectly competitive. The cost structure...

Consider the market for ice cream. Suppose that this market is perfectly competitive. The cost structure of the typical ice cream producer is as follows. Average total cost is equal to ???(?)=50?+12?, average variable cost is equal to ???(?)=12?, and marginal cost is equal to ??(?)=?. a.) Give a formula for the typical ice cream producer’s average fixed cost ???(?). What is the typical ice cream producer’s total fixed cost? b.) How many ice cream cones will each producer sell...

Assume the market for soybeans is a perfectly competitive market. Now suppose the cost of renting...

Assume the market for soybeans is a perfectly competitive market. Now suppose the cost of renting farmland increases (i.e. fixed resource costs have gone up). As a reference for your answer, graph this increase to average costs. (Important: since this is a fixed cost, we're assuming marginal costs do not shift, only average costs.) What will happen to the number of producers? Why is this the case? What will happen to the supply curve and the market price? Show this...