Economics

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.

  1. 👍
  2. 👎
  3. 👁

Respond to this Question

First Name

Your Response

Similar Questions

  1. Economics

    An industry currently has 100 firms, all of which have fixed costs of $16 and avg. variable cost as follows: Q Avg. Variable Cost ($) 1 1 2 2 3 3 4 4 5 5 6 6 a. Compute marginal cost and avg. total cost. b. the price is $10. what

  2. Economics

    A monopoly firm faces a demand curve given by the following equation: P = $500 − 10Q, where Q equals quantity sold per day. Its marginal cost curve is MC = $100 per day. Assume that the firm faces no fixed cost. You may wish to

  3. Math

    A caterer charges a fixed cost for preparing a dinner plus an additional cost for each person served. You know that the cost for 100 students will be $750 and the cost for 150 students will be $1050. Find the caterer's fixed cost

  4. math

    find expressions fr the revenue, cost, and profit from selling x thousand items: item price: $2.00 Fixed cost; $214,448 Variable Cost: -3x^2 + 3480x - 100 COuld anyone help me out? this is for my review for the final exam. ty in

  1. Economics

    The accompanying table shows a car manufacturer’s total cost of producing cars: Qty |TC| Variable Costs| Avg. Var. Costs| Avg. Total Costs| Avg. Fixed Costs 0 |$500,000| ---- | ---- | ---- |---- | 1 |540,000 | 2 |560,000 | 3

  2. Microeconomics

    A perfectly competitive industry has a large number of potential entrants. Each firm has an identical cost structure such that long run average cost is minimized at an output of 10 units (qi=10 ). The minimum average cost is R5

  3. Economics

    1. Your roommate's long hours in chem lab finally paid off--she discovered a secret formula that lets people do an hour's worth of studying in 5 minutes. So far, she's sold 200 doses and faces the following average-total-cost

  4. economics

    This is going to be really long, but I want to see if my answers are correct. This is problem number 10.10 in my Intermediate Microeconomics book. A perfectly competitive painted necktie industry has a large number of potential

  1. economics

    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

  2. economics

    perfectly competitive industry. Each firm having identical cost structures. long-run average cost is minimized at an output of 20 units. Minimum average cost is $10 per unit. total market demand is Q=1500-50P. What is the long-run

  3. Micreoeconomics

    1. Assume a perfectly competitive constant cost industry, currently in long-run equilibrium. Market demand in the industry is given by Q = 1500 - 25P. The short-run market supply curve is given by: Q = 15P - 100 for P B 10 = 0 for

  4. maths

    A printer charges a fixed setup cost plus $15 for every 100 cpoies if 300 copies cost $75 ,how much will 1000 copies cost

You can view more similar questions or ask a new question.