Friday
August 22, 2014

Homework Help: Economics

Posted by Mariah on Tuesday, November 28, 2006 at 6:47pm.

10. An industry currently has 100 firms, all of which have fixed cost of $16 and average variable cost as follows:
Quantity / Average variable cost: (1/$1),(2,$2), (3,$3), (4,$4), (5,$5), and (6,$6)

b. The price is currently $10. What is the total quantity supplied in the market?

I think that it is zero because the currently price does meet no exceed the average total cost, which is for the quantity 1, $17. Is this correct.

c. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall? Will the quantity supplied by each firm rise or fall?

I believe that the marginal cost would be (quantity/marginal cost): (1/NA),(2,$19), (3,$21), (4,$23), (5,$25), and (6,$27)is this correct?

Use your first principals of microeconomics; firms will produce where MC=MR. So, first construct your MC function. Calculate Total variable costs at each level of production. At Q=1 and AVC=1, Total cost is 1. At Q=2 and AVC=2, total cost is 4. and so on.

So, Q/TVC becomes (1,1),(2,4),(3,9),(4,16),(5,25),(6,36). Now determine marginal costs (Q/MC) becomes (1/na)(2,3)(3,5),(4,7),(5,9),(6,11).

So, if the price is $10, in the short run, each firm will produce 5 units. Total revenue becomes 5*$10=$50. Total costs becomes 25+16=$41. Total quantity supplied becomes 5*100=500.

In the long run, other firms will see the profit potential so, firms will go up, quantity supplied goes up, price goes down, and each firm produces the same or less.




Thank you for the information.

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Microeconomics - 3. An industry currently has 100 firms, all of which have fixed...
Managerial Economics - Suppose that a firm is currently employing 10 workers, ...
Economics - Suppose that a firm is currently employing 30 workers, the only ...
Economics - Suppose that a firm is currently employing 30 workers, the only ...
Economics - The market for fertilizer is perfectly competitive. Firms in the ...
Managerial ECON - Suppose that a firm is currently employing 10 workers, the ...
economics - A firm has fixed costs of $30.00 and variable costs as indicated in ...
Economics - An industry currently has 100 firms, all of which have fixed costs ...
Economics/Math - In a perfectly competitive industry, the market price is $25. A...
Economics - Variable cost divided by the change in quantity produced is A. ...

Search
Members