2. Assume that the market for G.I. Jane dolls is perfectly competitive. The market is known to be characterized by the following demand and supply equations (not necessarily in that order): P = 90 – 0.1Q and Q =-500 + 25P All firms are known to be identical, with fixed capital cost of 10, and VC; = 20Q; + 2Q? Answer the following: a) Which is the demand (or inverse demand), which is the supply (or inverse supply)? Why? b) Calculate the equilibrium market P and Q. c) How much will each firm produce and what is the profit or loss of each firm? How many firms are there?

2. Assume that the market for G.I. Jane dolls is perfectly competitive. The market is known to be characterized by the following demand and supply equations (not necessarily in that order): P = 90 – 0.1Q and Q =-500 + 25P All firms are known to be identical, with fixed capital cost of 10, and VC; = 20Q; + 2Q? Answer the following: a) Which is the demand (or inverse demand), which is the supply (or inverse supply)? Why? b) Calculate the equilibrium market P and Q. c) How much will each firm produce and what is the profit or loss of each firm? How many firms are there?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.6P

See similar textbooks

Similar questions

Short-run supply and long-run equilibrium Consiber the competitive market for rhodium. Assume that no matter how many firms operate in the induatry, every firm is identical and faces the same marpinal cost (MC), averapt total cost (ATC), and average variable cost (AVC ) curves plotted in the following praph. The following graph plots the market demand curve for thodium. If there were 10 firms in this market, the short-run equilibrium price of rhodium would be per pound. At that price, firms in this industry would. Therefore, in the long run, firms would the rhodium market. Because you know that competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be per pound. From the graph, you can see that this means there will be firms operating in the rhodium industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. True False
Suppose there are only two firms in a competitive market for a good. Firm 1's marginal cost curve is given by MC = 2.5 +0.5Q and the equation of 4+Q³. What is the equation of the - firm 2's marginal cost curve is MC supply function for this market? - a) MC = 6.5 +1.5Q⁹ b) MC = 0.33Q⁹ +3 c) Q³ = 3p - 9 d) P = 6.5 +1.5Qs
Consider the competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. (? 80 72 64 56 48 ATC 40 32 24 AVC 16 MC O + + + + + 4 8 12 16 20 24 28 32 36 40 QUANTITY (Thousands of pounds) COSTS (Dollars per pound)
4.5 Show that the long-run equilibrium number of firms is indeterminate when all firms in the industryshare the same constant returns-to-scale technology and face the same factor prices.4.7 Technology for producing q gives rise to the cost function c(q) = aq + bg. The market demand forqisp =a - Bq.(a) If a>0, if b < 0, and if there are J firms in the industry, what is the short-run equilibriummarket price and the output of a representative firm?b) Ifa> 0 and b <0, what is the long-run equilibrium market price and number of firms? Explain.() Ifa>0and b > 0, what is the long-un equilibrium market price and number of firms? Explain.
Consider a competitive industry with a large number of firms, all ofwhich have identical cost functions c(y) = y2 + 1 for y > 0 and c(0) = 0. Supposethat initially the demand curve for this industry is given by D(p) = 52 − p.(a) What is the supply curve of an individual firm?(b) If there are n number of firms, what is the industry supply curve?(c) What is the smallest price at which the product can be sold?(d) Based on your answers to parts (a)-(c), explain in detail theequilibrium points based on the market activity with respect to the price, firmand industry.
2. Consider a market with 90 firms, each firm has a short-run total cost function as follows: TC(q) = 5q2, and a marginal cost function: MC(q) = 10q. Market demand is given by equation Qd(p) = 200 - p. a. Solve for the short-run equilibrium outcome: P*, Q* and q*. b. What is one firm's economic profit in this market? c. Consider a different market structure, where there is only one firm, interpreted as a monopolist, and then critically discuss the impact on equilibrium price and quantity. Discuss total surplus for these two types of market structures.
Suppose that each firm in a competitive industry has thefollowing costs: Total cost: TC=50 + 1/2q^2 Marginal cost: MC=q where q is an individual firm’s quantity produced. The marketdemand curve for this product is Demand: QD = 120 – P where P is the price and Q is the total quantity of the good.Currently, there are 9 firms in the market. a. What is each firm’s fixed cost? What is its variable cost?Give the equation for average total cost. b. Graph average total cost curve and the marginal cost curvefor q from 5 to 15. At what quantity is average total cost curve atits minimum? What us marginal cost and average total cost at thisquantity? c. Give the equation each firm’s supply curve. d. Give the equation for the market supply curve for the shortrun in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market inthe short run? f. In this equilibrium, how much does each firm produce?Calculate each firm’s profit or loss. Is there incentive for…
1. There are two firms, A and B, on a competitive market. Firm A's total cost is given by: and firm B's total cost is given by: TCA(Q) 1+0.50² TCB (Q) = 0.502 + 6Q The market demand curve is Qd = 6-p. We denote by Qs the market supply (i.e., the sum of firm A's supply and firm B's supply). (b) What is the slope of the market supply curve (i.e. dQs/dp) when p = 3? What is the slope of market supply curve when p = 7? (c) Find the market equilibrium price p* and quantity Q*.
Suppose that the market demand for a product is given by ( A > 0 and B > 0). Suppose QABP=-also that in a competitive industry the typical firm’s cost function is given by (k > 2()Cqkaqbq=++0, a > 0 and b > 0).(a) Calculate the long-run equilibrium market price and the output for the typical firm. (b) Calculate the equilibrium number of firms in the market.(c) Describe how changes in the demand parameters A and B affect the equilibrium number of firms in this market. Explain your results intuitively.
Problem 2. Suppose the market demand and inverse-demand for pizza in East Lansing is given by: Demand: Qd 1100-5P 220-2₁ Inverse-Demand: P = 220- Currently, there are 100 pizza stores in the East Lansing area that produce identical pizzas and as such the market is perfectly competitive. Suppose each pizza store has identical cost function given by: C(q) = 100 +g+q², fixed-cost I MC(q)=1+2q where C(q) is the total cost, and MC(q) is the marginal cost function. As shown in the total cost function, each pizza store incurs a $100 fixed cost which is a sunk-cost in the short-run but avoidable in the long-run. Recall that the market supply is the sum of individual firm's supply functions, and that individual's (inverse) supply curve is given by its marginal cost function i.e. Individual firm's inverse-supply: P= mc(q) = 1 + 2q Individual firm's supply: 9,= 0.5P - 0.5 Market Supply: 2, 100q, = 50P - 50 (a) What is the short-run equilibrium market price/quantity of pizza in East Lansing? (b)…
Can you help with this question and show all the step please. Consider a manufacturer making leather cases with a market demand function (weekly) given by P=95-Q/Q+1 +5, where Q is the number of leather cases. (A) Show that this function is consistent with the law of Demand (i.e. that when Q increases, P decreases). (B) The manufacturer has weekly fixed costs of $20 and variable costs of $5 per leather case. Formulate the profit function from this information. (C) Locate the stationary points and determine the optimal Q that maximises the profit. (Use the first derivatives test to classify any stationary point).
5. The market demand for leather handbags is given by the function P = 75 - 1.5Q. P is priceper handbag, and Q is output per time period.The market supply is given as P = 25 + 0.50Q. A typical competitive firm that markets thistype of bag has a marginal cost of production of MC = 2.5 + 10q. [4]a) Calculate the market equilibrium price for the bags as well as the output rate in themarket.b) Calculate how much the typical firm will produce per time period at the equilibriumprice.c) If all firms had the same cost structure, how many firms would compete at theequilibrium price computed in (a) above?