colgate is one firm of many in the market for toothpaste, which is in long run equilibrium.
a) draw diagram showing colgate's demand curve, MR curve, ATC curve and MC curve. label colgate profit maximizing output and price
welfare payment is an amount of money
c=100+2q2+5q2
To draw the diagram showing Colgate's demand curve, MR curve, ATC curve, and MC curve, follow these steps:
1. Start by drawing the quantity (Q) on the X-axis and the price (P) on the Y-axis. This will be the basic framework for the diagram.
2. Draw the demand curve (D) for Colgate's toothpaste. This curve represents the relationship between the quantity of toothpaste demanded by consumers and the price. The demand curve slopes downward because as the price decreases, more consumers are willing to purchase the product.
3. Next, draw the marginal revenue (MR) curve. The MR curve will lie below the demand curve and have the same shape. Since Colgate is a price taker, it will sell its toothpaste at the market price, which means that the MR curve will coincide with the demand curve.
4. Draw the average total cost (ATC) curve. This curve represents the average cost of producing each unit of toothpaste. It typically slopes downward at first due to economies of scale and then upward due to diminishing returns.
5. Now draw the marginal cost (MC) curve. This curve represents the additional cost incurred for producing each additional unit of toothpaste. It usually intersects the ATC curve at its minimum point.
6. Find the profit-maximizing output and price. The profit-maximizing output occurs where MR intersects MC. Draw a vertical line from this intersection point to the demand curve, and then draw a horizontal line to the Y-axis to determine the corresponding price.
Label the profit-maximizing output as Q* and the corresponding price as P*.