there are just certain things that i do not understand about the questions...(i did read A LOT last night and i did not find anything that really answered my questions)...To be more specific...
suppose a competitive market consists of identical firms with a constant long run marginal cost of $10. Suppose the demand curve is given by q=1000-p
a)What are the price and quantity consumed in the long run competitive equilibrium?
b)Suppose one new firm enters that is different from the existing firms. The new firm has a constant marginal cost of $9 and no fixed costs but can only produce 10 units (or fewer). What are the price and quantity consumed in the long run competitive market?
how could one firm's Marginal cost be $9 and could only produced 10 units? Wouldn't one have to know the number of total firms in the competitive industry to answer this questions?
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If the demand curve is q=5/p, what is the elasticity of demand? What is total revenue when p=1 and when p=30? If production costs $1 per unit, and the smallest production level is 1 unit, how much should the monopolist produce?
how do you find elasticity if you do not have Q1, Q2, P1,P2, or for a nonlinear function?
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A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 30 - y and its total costs are c(y) = 5y, Calculate the equilibrium price, output, monopoly profits and mark up. What would the equilibrium be if the market were supplied competitively by firms and each individual firm had the same costs?
For this question i don't even know where to begin..the teacher didn't give good notes and the textbook is all conceptual..there are hardly any examples.. please can you give me a site that will help me or give me an equation or something... i don't just want someone to do my... just an explanation...formula...etc. thanks
a) To find the long-run competitive equilibrium price and quantity, we need to determine where the demand curve intersects the long-run average cost (LRAC) curve. In perfect competition, the firms make zero economic profit in the long run, so the price will be equal to the average cost. Here's how to solve it step by step:
1. Start by finding the long-run average cost (LRAC) curve. Since the question states that the firms have a constant long-run marginal cost of $10, their LRAC curve will be a horizontal line at $10.
2. Next, find the intersection between the demand curve and the LRAC curve. The demand curve is given by q = 1000 - p, where q represents quantity and p represents price. To find the equilibrium quantity, set quantity demanded (q) equal to quantity supplied (QS). So, 1000 - p = QS.
3. Since the market consists of identical firms, the quantity supplied by each firm is the total quantity divided by the number of firms. Let's assume there are N firms. So, each firm supplies QS/N units.
4. Equate this quantity supplied per firm to the cost of producing each unit, which is the long-run marginal cost of $10. So, 1000 - p = 10QS/N.
5. Rearrange the equation to solve for price (p) in terms of quantity supplied per firm (QS/N): p = 1000 - 10QS/N.
6. Substitute this price equation into the LRAC curve to find the equilibrium price. Since the LRAC curve is a horizontal line at $10, we have 10 = 1000 - 10QS/N. Simplify the equation to solve for QS/N.
Once you find QS/N, multiply it by the number of firms (N) to get the total quantity consumed in the long-run competitive equilibrium.
b) When a new firm enters the market, it introduces additional competition. To find the price and quantity consumed in the long-run competitive market, you can use the same steps as in part (a), but now include the new firm's characteristics.
Considering that the new firm has a constant marginal cost of $9 and can produce a maximum of 10 units, you need to modify step 2. The new demand curve will be q = (1000 - p) + 10, because the new firm can supply up to 10 units. The rest of the steps remain the same, and you can determine the new equilibrium price and quantity.
Regarding your question about the constraint on marginal cost and production units, it's possible for a firm to have a relatively low marginal cost and produce a limited quantity due to capacity constraints or other factors. The number of total firms in the competitive industry is not necessary to answer this question, as it focuses on the impact of a single new firm.
For the second question, unfortunately, you haven't provided the full demand function. The elasticity of demand measures the responsiveness of quantity demanded to changes in price. To calculate it, you would need the derivative of the demand function with respect to price. Without specific details, it is not possible to determine the elasticity of demand.
To find the total revenue when p=1 and p=30, substitute those values into the given demand function. Multiply the price by the quantity demanded at each price (q = 5/p) to calculate the total revenue.
Regarding the production level for the monopolist, it depends on the profit-maximizing condition. In a monopolistic setting, the monopolist would produce where marginal cost equals marginal revenue. However, without additional information or a specific equation, it is not possible to determine the exact production level.
For the last question about a profit-maximizing monopoly, you are given the inverse demand function p(y) = 30 - y and the total cost function c(y) = 5y. To find the equilibrium price and output, you need to set marginal revenue (MR) equal to marginal cost (MC).
1. Determine the total revenue (TR) function by multiplying the price (p) by the quantity (y). TR = p(y) * y.
2. To find marginal revenue (MR), take the derivative of total revenue with respect to quantity (dy). MR = d(TR)/dy.
3. Set MR equal to MC and solve the resulting equation to find the equilibrium output (y) and price (p).
Once you find the equilibrium price and output, you can calculate monopoly profits by subtracting total costs (c(y)) from total revenue (p(y) * y). The markup can be calculated by dividing the difference between price and marginal cost by marginal cost ((p - MC)/MC).
If you need further assistance or resources to understand these concepts, I recommend consulting textbooks, online lecture notes, or reputable educational websites that cover microeconomics and the theory of monopolies and competition.