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ECON 208 Study Guide - Root Mean Square, Marginal Cost, Html

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goldhedgehog288
2 Sep 2013
School
McGill University
Department
Economics (Arts)
Course
ECON 208
Professor
Wendy Dickinson

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ECON 208 Full Course Notes
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ECON 208 Full Course Notes
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Document Summary

Consider an individual rm that is small relative to the industry in which it sells its product. The rm"s technology is such that its marginal cost (in dollars) is given by: Read carefully the additional topic (found on myeconlab) called the long-run industry. A major theme of this chapter is the role that free entry and exit play in determining a competitive industry"s long-run equilibrium. Keeping this term in mind, think of the following statement: Suppose that the knowledge produced by pharmaceutical rms" research and development (r&d) activities is bene cial for society as a whole: assume that pharmaceutical rms operate in a perfectly competitive market. Imagine that that the government allows rms of type a to patent their new products. Compare the costs in a free market with those in a world of complete patent protection. Discuss the tradeo s involved in the design of optimal patent policies.

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Related Questions

28) Consider a perfectly competitive firm that is producing a level of output such that price equals average total cost and average total cost is less than marginal cost. In order to maximize its profits, the firm should A) reduce output. B) expand output. C) shut down D) increase the market price. E) not change output.

1. A firm's total cost of producing 50 units of output is $1,000. At this output level, average fixed costs are equal to $10. It follows that the firm's average variable costs are equal to _____.

2. To maximize profits, a price-taking (i.e., competitive) firm should produce its output up to the level where

a. the market price of the firm's product is equal to its total variable cost.

b. the market price of the firm's product is equal to its s total cost.

c. the market price of the firm's product is equal to its marginal cost.

d. marginal cost is equal to average cost.

e. none of the above.

3. To minimize losses, a competitive firm should shut down if the price is less than

a. average cost.

b. average variable cost.

c. total cost.

d. marginal cost.

e. average total fixed cost

In a perfectly competitive market suppose that a competitive firm's marginal cost of producing output q is given by MC(q)=3+2q. Assume that the market price of the product is $9:

A.What level of output will the firm produce?
B.What is the firm's producer surplus?