Question

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

Total Cost:	TC=50+12q2TC=50+12q2
Marginal Cost:	MC=qMC=q

where q is an individual firm's quantity produced.

The market demand curve for this product is:

Demand

QD=140−2PQD=140−2P

where P is the price and Q is the total quantity of the good.

Each firm's fixed cost is ($ )

What is each firm's variable cost?

A) 50+1/2q

B) q

C) 1/2q

D) 1/2q ^2

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

A) 50/q+1/2q

B) 50/q

C) 1/2q

D) 50+1/2 q

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

q	Marginal Cost	Average Total Cost
(Units)	(Dollars)	(Dollars)
5
6
7
8
9
10
11
12
13
14
15

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

.

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

A) 1/2q ^2

B) q

C) 50-q

D) 120- 1/2q^2

In the long run, the firm will remain in the market and produce if (q<_15, q>_10, q>_5,5<q<15)

Currently, there are 8 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 (enter/exit) 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 are ( )firms in the market, with each firm producing ( )units.

Answer 1

1. TC = 50+1/2q^2

MC = dTC/dq = 2q/2 = q

TC = TFC+TVC

TVC for a firm = a/2q^2.

The correct option is D.

2. Average TC = TC/q

AC = (50 + 1/2q^2)/q

AC = 50/q + 1/2q

The correct option is A

3. Table

q	MC	ATC
units	Dollars	Dollars
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

4. Average total cost is minimum when the quantity each firm produces q equals average total cost. At minimum point ATC and MC are equal. MC represents what the firm produces

5.Supply is represented by the MC curve:

Thus correct option is B

6. In long run firm produces until q is less than 10 where the average cost and marginal cost are equal. See table.

Supposed to do as many questions only. Please post other parts as a separate question. Please confirm the Demand curve also. TC has a typo. Took hint from MC. Do write for clarification.