Friday
September 19, 2014

Homework Help: ECON

Posted by Trisha on Friday, June 24, 2005 at 1:03pm.

I am working on this but, if I have part a and b wrong, all of the following question related will be wrong. Can you help me out?

The market for product A has the following functions:

Market demand Q=1,000-4P
Market supply Q=1/2P
Inverse market demand P=250-.25Q
Marginal Revenue MR=250-.5Q
Total Cost TC=Q(squared)
Marginal Cost MC=2Q

a) Assuming product A is produced in a perfectly competitive market, compute the market's producer and consumer surplus.

b)Assuming product A is produced in a monopolistically ompetitive market, compute the firm's short-run maximum profit or loss.

Thanks!


For a) i get P=222.2, Q=111.11. Total consumer surplus is the area of the triangle above price and below demand = .5*(250-222.2)*111.11 = 1544.4. Total producer surplus is the area of the triangle below price and above supply = .5*222.2*111.11=12344.3

For b) i get P = 225, Q=100. (you take if from here)



I don't understand how the p=222.2 is calculated. I know where it is on the graph, but how do you get it? I thought it was MR=MC but that would be 100. Can you explain it?


Ok, in the competitive market, equilibrium is when supply=demand. From your equations, 1000-4P = 1/2P.
Solve for P. (I get 222.2).

For the monopolist, set MR=MC, and as you say, Q=100. From the demand curve, when Q=100 then P=225.



Oh, Okay. Thanks!


Referring back to problem b. It looks to me like Firm A has a short run max. profit rather than a loss. Right?


Right. You can calculate total profit as TR-TC (at price P and quantity Q).

TR=P*Q, and TC=Q^2.


same same. ATC is average total cost, which is TC/Q. Substitute this in for ATC and your get profit= (P - TC/Q)Q = PQ-TC. Since P*Q is total revenue, profit = TR-TC, which makes sense; profit is total revenues less total costs.



Thanks!

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Algergra - I am stumped! I have been working on these problems for the longest ...
Chemistry - Small gene Big Plasmid Question 2 Part E is wrong. Question 2 Part F...
biology - Small gene big plasmid Question 2 Part E wrong. Question 2 Part F ...
math,help - I need help with thisone solve: ((x)/(5x+10))+ ((x-3)/(x+2)) = (7)/(...
alg2/trig - I got this question wrong on my test, and I have to correct it :/ ...
dif. bet. Mm and mm - I was just working on a problem and i seem to keep getting...
alg. - Find the slope of the line passing through the points (2, 1) and (3, 9...
man alive! can someone check for me? - I am so bad when it comes to mathI I ...
Language Arts - In the sentence....They have done nothing wrong. I know "have ...
Science - The sensitivity of a measuring instrument is the value of the smallest...

Search
Members