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ECON 160 Lecture Notes - Lecture 33: Marginal Revenue, Market Price

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indigoraven449
9 Dec 2016
School
Binghamton University
Department
Economics
Course
ECON 160
Professor
Susan W.Hanes

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Document Summary

Not long-run equilibrium b/c minimum not equal avc. How see it long-run b/c lower than atc (takes price from market) Under special occasions of identical firms, assume n number of firms in market. Market price = mc = atc (no entry or exit) Firms will never enter nor exit market if the market price is : avc, >>mc, = atc, never. Answer: c b/c firms in market (no exit) Difference: m __?__ n: > d. uncertain. Answer: c m smaller number than n because firms left market m & n = number of firms in market with supply". The efficient size of the firm (least regroves) The efficient size of firm is 1 firm is 1 firm. Is small relative to market long-run firm small relative to market. Monopolies exists if: government guarantees leisure for only one firm (vc) * very large firms fixed costs relative to mc. As a firm increases production, fixed costs: fal, rise b.

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Related Questions

In the long-run equilibrium of a competitive market with identical firms, what are the relationships among priceĀ P, marginal costĀ MC, and average total costĀ ATC?

a.Ā P > MCĀ andĀ PĀ >Ā ATC.

b.Ā PĀ >Ā MCĀ andĀ P =Ā  ATC.

c.Ā P = MCĀ andĀ P Ā > ATC.

d.Ā PĀ =Ā MC and P = ATC.

1. A firm that is a pure competitor has P > ATC and P > MC on the output (Q) it is presently producing and selling. Is this firm maximizing its profits? If not, which direction should it change its output if it wants to maximize its total profit?

2. Is a pure competitor in short-run or long-run equilibrium if it has P=MC=ATC? Explain.

3. There is free entry in the model of pure competition. Assuming that P > ATC for a vast number of firms producing a standardized product for a given market, what will happen to market supply as the consequence? What will happen to the market price (P) of the product these firms are producing?

4. Firms in the pure competition have horizontal demand functions. (The market determines product price, so firms in this competitive market are price takers.) Do firms in this model have to lower prices if they want to sell more output? Why or why not?

Your firm is one of 100 identical firms operating in the short run in a perfectly competitive market. Your total cost function (short run and long run) is C = 800 + 25 q + 0.5 q2, and your marginal cost function is MC = 25 + q. The (short run and long run) market demand curve is given by Q = 2,750 Ć¢Ā€Ā“ 5P. a.Find the supply curve for your firm. Show work. Then, find the short-run market supply curve. Show work. b.Find equilibrium price, P*, and quantity, Q*, in the market in the short run.Show work. c.Find the lowest price at which your firm will not exit the market in the long run.Show work. Referring to your answer in part b, should your firm exit the market in the long run if P* in the market does not increase over time?Explain. d.If you choose not to exit, how many firms (including your own) do you expect to be in the market in the long run?Show work, and explain.