1) Suppose that the demand curve faced by a particular firm is given by q = 300 - 5P. Could this be a perfectly competitive firm?
2) The market for wall clocks is perfectly competitive, and the current market price of a wall clock is $24. A particular firm has a short-run marginal cost of production of MC = 0.75q, where q is the number of clocks that it produces.
a. If it is optimal for the firm to produce a positive amount of output in the short run, how much should it produce?
b. Suppose that the firm has fixed costs of $3,000, and its average variable cost when producing the number of clocks found in part (a) is $20. Should the firm produce the amount that you found in part (a) or shut down (produce q = 0)?
c. Suppose instead (for this and all subsequent questions) that the firm has fixed costs of $240, and its variable cost when producing the number of clocks found in part (a) is $400. What is the firm's profit if it produces this amount of output?
d. Under the conditions described in part (c), if this is a constant-cost industry and the demand curve does not change over time, will firm enter this market in the long run or will firms exit this market in the long run?
1) Suppose that the demand curve faced by a particular firm is given by q = 300 - 5P. Could this be a perfectly competitive firm?
2) The market for wall clocks is perfectly competitive, and the current market price of a wall clock is $24. A particular firm has a short-run marginal cost of production of MC = 0.75q, where q is the number of clocks that it produces.
a. If it is optimal for the firm to produce a positive amount of output in the short run, how much should it produce?
b. Suppose that the firm has fixed costs of $3,000, and its average variable cost when producing the number of clocks found in part (a) is $20. Should the firm produce the amount that you found in part (a) or shut down (produce q = 0)?
c. Suppose instead (for this and all subsequent questions) that the firm has fixed costs of $240, and its variable cost when producing the number of clocks found in part (a) is $400. What is the firm's profit if it produces this amount of output?
d. Under the conditions described in part (c), if this is a constant-cost industry and the demand curve does not change over time, will firm enter this market in the long run or will firms exit this market in the long run?
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Related questions
At the short-run break-even point, the perfectly competitive firm is producing how many units of output at the market price of 150$? Furthermore how many units of output will the firm produce to maximize profit in the short run? Specify the amount of economic profit or loss for the firm
| Output (Q) | Total Fixed Costs (TFC) ($) |
Total Variable Costs (TVC) ($) |
| 1 | 100 | 120 |
| 2 | 100 | 200 |
| 3 | 100 | 290 |
| 4 | 100 | 430 |
| 5 | 100 | 590 |
