Consider an industry in which each firm has a total cost function given by
C(q) = q2 +5q + 100
where q is the firmâs output. Suppose that the total output necessary to serve the market for this good is 50, which can be provided in the following ways:
1 firm produces all 50 units
5 firms produce 10 units each
10 firms produce 5 units each
Derive the average cost function associated with the above total cost function and calculate average costs per firm for each of these combinations. (Remember, AC=C/q.) Which is the most efficient way to serve the market demand? Why?
Consider an industry in which each firm has a total cost function given by
C(q) = q2 +5q + 100
where q is the firmâs output. Suppose that the total output necessary to serve the market for this good is 50, which can be provided in the following ways:
1 firm produces all 50 units
5 firms produce 10 units each
10 firms produce 5 units each
Derive the average cost function associated with the above total cost function and calculate average costs per firm for each of these combinations. (Remember, AC=C/q.) Which is the most efficient way to serve the market demand? Why?
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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.
This is due today!! Thank you!!
Consider a firm with production function f(L, K)=2L+6K. Assume that capital is fixed at K=6. Then, the amount of labor necessary to produce q units is?
| A |
L(q,6)= q-12 |
|
| B |
L(q,6)= q/18-5 |
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| C |
L(q,6)= q/2-18 |
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| D |
L(q,6)= 3q/5-2 |
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| E |
L(q,6)= q2/2-12 |
Consider a firm with production function f(L, K)= 4L2/3K1/3. Assume that capital is fixed at K=1. Assume also that the price of capital r=4 and the price of labor w=2. Then, the average cost of producing q units is?
| A |
AC(q)= 4/q+q1/2/4. |
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| B |
AC(q)= 2/q+1/4q1/3. |
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| C |
AC(q)= 2/3q+1/q1/3. |
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| D |
AC(q)= 1/3q+q1/2. |
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| E |
AC(q)=8/q+2q1/2. |
Consider a firm with production function f(L, K)=3L1/3K2/3. Assume that capital is fixed at K=1. Assume also that the price of capital r=5 and the price of labor w=3. Then, the cost of producing q units is?
| A |
C(q)=3+q2/9. |
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| B |
C(q)=10+q3. |
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| C |
C(q)=5+q3/9. |
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| D |
C(q)=2/3+q2/3. |
|
| E |
C(q)=1/3+q3/3. |
