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 is the total quantity supplied in the market?

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?

d. graph the long-run supply curve for this market


I don't know how to do it at all..I'd appreciate any help! Thanks!! =)

a) First construct total variable cost for each level Q -- simply multiply Q by AVC. So

Q TVC
1 1
2 4
3 9
4 16
5 25
6 36

Now calculate marginal cost as the change in TVC for each level Q.
Q MC
1 1
2 3
3 5
4 7
5 9
6 11

b) with price = 10, firm will produce 5 but not 6 units.

c) calculate total profits at Q=5. Total revenue is $50, total costs is $25+$16 = $41. Since there are profits to be made, more firms will enter, shifting the supply curve out, Price will fall, quantity goes up. Each firm will supply the same or less as price falls.

d) draw a demand curve and supply curve that has an equilibrium price under 10, equilibrium quantity over 500. Now draw a U-shaped Industry-wide Total Average Cost curve with the very bottom of the curve touching the point where supply crosses demand.

Oh, I see how it all connects now. Thank you so much!

  1. 👍 4
  2. 👎 0
  3. 👁 3,513
asked by Maggie
  1. A) I am confused, isnt it asking for average total cost, not TVC?

    1. 👍 0
    2. 👎 0
    posted by Sally
  2. also confused. TVC?

    1. 👍 0
    2. 👎 0
  3. Why each firm decide to produce 5 units at the price 10..???

    1. 👍 0
    2. 👎 0
    posted by TOE

Respond to this Question

First Name

Your Response

Similar Questions

  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

    asked by shay on May 25, 2011
  2. Economics

    What is the computing? in terms of math Industry structure is often measured by computing the Four-Firm Concentration Ratio. Suppose you have an industry with 20 firms and the CR is 20%. How would you describe this industry?

    asked by Mike Green on November 25, 2008
  3. managerial economicsQ3

    Suppose the inverse market demand equation is P = 80 ¡V 4(QA+QB), where QA is the output of firm A and QB is the output of firm B, and both firms have a constant marginal cost of $4 (fixed costs are zero). (a)Write down the

    asked by jenny on September 7, 2008
  4. Economics

    You want to start a company, and are trying to decide between two different industries. You are doing your final research before you write your business plan. Industry A has 20 firms and a Concentration Ratio (CR) of 20% * What is

    asked by Mike on November 19, 2010
  5. Macroeconomics

    You want to start a company, and are trying to decide between two different industries. You are doing your final research before you write your business plan. Industry A has 20 firms and a Concentration Ratio (CR) of 20% * What is

    asked by Need Help on November 20, 2010
  6. Economics

    You want to start a company, and are trying to decide between two different industries. You are doing your final research before you write your business plan. Industry A has 20 firms and a Concentration Ratio (CR) of 20% * What is

    asked by Joe Smith on November 19, 2010
  7. 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

    asked by michele on September 20, 2007
  8. economics

    When a firms long run avg cost curve is horizontal for a range of output, then in that range production displays: a) constant avg fixed costs b) increasing returns to scale c) constant returns to scale d) decreasing returns to

    asked by dav-0 on October 6, 2009
  9. Macroeconomics

    I need help with my assignment. You want to start a company, and are trying to decide between two different industries. You are doing your final research before you write your business plan. Industry A has 20 firms and a

    asked by Cora on September 2, 2011
  10. Economics

    The handmade snuffbox industry is composed of 100 identical firms, each having short – run total costs given by STC = 0.5q2 + 10q + 5 and short – run marginal costs by SMC = q + 10 where q is the output of snuffboxes per day.

    asked by Pravinesh on November 2, 2011

More Similar Questions