Suppose the local crawfish market is perfectly competitive, with the following market demand and supply: Market Demand: QD = 6500 - 100P Market Supply: QS = 1200P, where market quantity demanded (QD) and market quantity supplied (QS) are measured in pounds and price (P) is measured in dollars per pound. Assuming all firms have identical costs, suppose the typical firm in the market has the following short-run total cost (TC) and marginal cost (MC), with q being the quantity produced by the firm: Total Cost: TC=722+q2/200 Marginal Cost: MC=2q/200
A. What is the price at which a firm is indifferent between producing in the short-run and shutting down production?
B. Determine the market equilibrium price and quantity of crawfish, the output supplied by each firm, and the profit of each firm. How many firms must currently be in this market?
C. Based on your answer to B, would you expect to see entry or exit in the long-run? How would this impact the price of crawfish over time, ceteris paribus?
Suppose the local crawfish market is perfectly competitive, with the following market demand and supply: Market Demand: QD = 6500 - 100P Market Supply: QS = 1200P, where market quantity demanded (QD) and market quantity supplied (QS) are measured in pounds and price (P) is measured in dollars per pound. Assuming all firms have identical costs, suppose the typical firm in the market has the following short-run total cost (TC) and marginal cost (MC), with q being the quantity produced by the firm: Total Cost: TC=722+q2/200 Marginal Cost: MC=2q/200
A. What is the price at which a firm is indifferent between producing in the short-run and shutting down production?
B. Determine the market equilibrium price and quantity of crawfish, the output supplied by each firm, and the profit of each firm. How many firms must currently be in this market?
C. Based on your answer to B, would you expect to see entry or exit in the long-run? How would this impact the price of crawfish over time, ceteris paribus?
