Consider a monopolistically competitive market with N firms.
Each firm's business opportunities are described by the following
equations:
Demand: Q=100/N-P
Marginal Revenue: MR=100/N-2Q
Total cost: TC=50+Q(squared)
Marginal Cost: MC=2Q
a. How does N, the number of firms in the market, affect each firms
demand curve? Why.
b. How many units does each firm produce? (The answer to this and
the next two questions depend on N.)
c. What price does each firm charge?
d. How much profit does each firm make?
e. In the long run, how many firms will exist in this market?
Consider a monopolistically competitive market with N firms.
Each firm's business opportunities are described by the following
equations:
Demand: Q=100/N-P
Marginal Revenue: MR=100/N-2Q
Total cost: TC=50+Q(squared)
Marginal Cost: MC=2Q
a. How does N, the number of firms in the market, affect each firms
demand curve? Why.
b. How many units does each firm produce? (The answer to this and
the next two questions depend on N.)
c. What price does each firm charge?
d. How much profit does each firm make?
e. In the long run, how many firms will exist in this market?
Related textbook solutions
Related questions
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 Ā is an individual firm's quantity produced.
The market demand curve for this product is:Ā
Demand QD=140-2P
whereĀ Ā PĀ is the price and QĀ is the total quantity of the good.
Each firm's fixed cost is $__________
Ā
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?
Ā Ā _____ 50/q
_______ 50/q+1/2q
_______1/2q
_______50+1/2q
Complete the following table by computing the marginal cost and average total cost forĀ Ā Ā Ā from 5 to 15.
| 5 | Ā | Ā |
| 6 | Ā | Ā |
| 7 | Ā | Ā |
| 8 | Ā | Ā |
| 9 | Ā | Ā |
| 10 | Ā | Ā |
| 11 | Ā | Ā |
| 12 | Ā | Ā |
| 13 | Ā | Ā |
| 14 | Ā | Ā |
| 15 | Ā | Ā |
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__________Ā In the short run, in which the number of firms is fixed, the equilibrium price is
________units. Each firm produces ________Ā 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 _______Ā . (Note: Enter a negative number if the firm is incurring a loss.)
Firms have an incentive to EXIT/ENTERĀ 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.
