ECON 101 Final: ECON101 Final Exam Practice 2 with Solutions
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Suppose that each firm in a competitive industry has the following costs:
Total Cost: TC=50+1/2 q2
Marginal Cost: MC=q
where q is an individual firm's quantity produced.
The market demand curve for this product is:
Demand QD=140-2P
where P is the price and Q is the total quantity of the good.
Each firm's fixed cost is $__________
What is each firm's variable cost?
_______ 50+1/2q
_______1/2q
_______q
_______1/2q2
Which of the following represents the equation for each firm's average total cost?
_____ 50/q
_______ 50/q+1/2q
_______1/2q
_______50+1/2q
Complete the following table by computing the marginal cost and average total cost for from 5 to 15.
| 5 | ||
| 6 | ||
| 7 | ||
| 8 | ||
| 9 | ||
| 10 | ||
| 11 | ||
| 12 | ||
| 13 | ||
| 14 | ||
| 15 |
The average total cost is at its minimum when the quantity each firm produces (q) iquals ________
Which of the following represents the equation for each firm's supply curve in the short run?
_______1/2q2
______q
_____50-q
_____120-1/2q2
In the long run, the firm will remain in the market and produce if________
Currently, there are 8 firms in the market.
In the short run, in which the number of firms is fixed, the equilibrium price is__________ In the short run, in which the number of firms is fixed, the equilibrium price is
________units. Each firm produces ________ nits. (Hint: Total supply in the market equals the number of firms times the quantity supplied by each firm.)
In this equilibrium, each firm makes a profit of _______ . (Note: Enter a negative number if the firm is incurring a loss.)
Firms have an incentive to EXIT/ENTER the market.
In the long run, with free entry and exit, the equilibrium price is _______and the total quantity produced in the market is__________units. There are ________
firms in the market, with each firm producing _________units.
Assume that the cost data in the table below are for a purely competitive producer:
|
Total Product |
Average Fixed Cost |
Average Variable Cost |
Average Total Cost |
Marginal Cost |
|
0 |
||||
|
1 |
$60.00 |
$45.00 |
$105.00 |
$45 |
|
2 |
30.00 |
42.50 |
72.50 |
40 |
|
3 |
20.00 |
40.00 |
60.00 |
35 |
|
4 |
15.00 |
37.50 |
52.50 |
30 |
|
5 |
12.00 |
37.00 |
49.00 |
35 |
|
6 |
10.00 |
37.50 |
47.50 |
40 |
|
7 |
8.57 |
38.57 |
47.14 |
45 |
|
8 |
7.50 |
40.63 |
48.13 |
55 |
|
9 |
6.67 |
43.33 |
50.00 |
65 |
|
10 |
6.00 |
46.50 |
52.50 |
75 |
- a. At a product price of $56, will this firm produce in the short run? It is preferable to produce, what will be the profit-maximizing or loss-minimizing output? What economic profit or loss will the firm realize per unit of output?
- b. Answer question 2a assuming the product price is$41.
- c. Answer question 2a assuming the product price is$32.
- d. In the table below, complete the short-run supply schedule for the firm (columns 1 and 2) and indicate the profit or loss incurred at each output (column 3).
|
(1) Price |
(2) Quantity Supplied, Single Firm |
(3) Profit (+) Or Loss (-) |
(4) Quantity Supplied 1500 Firms |
|
$26 |
$ |
||
|
32 |
|||
|
38 |
|||
|
41 |
|||
|
46 |
|||
|
56 |
|||
|
66 |
- e. Now assume that there are 1500 identical firms in this competitive industry; that is, there are 1500 firms, each of which has the cost data shown in the table. Complete the industry supply schedule (column 4).
- f. Suppose the market demand data for the product are as follows:
|
Price |
Total Quantity Demanded |
|
$26 |
17,000 |
|
32 |
15,000 |
|
38 |
13,500 |
|
41 |
12,000 |
|
46 |
10,500 |
|
56 |
9,500 |
|
66 |
8,000 |
What will be the equilibrium price? What will be the equilibrium output for the industry? For each firm? What will profit or loss be per unit? Per firm? Will this industry expand or contract in the long run?
