ECO200Y5 Study Guide - Final Guide: Economic Surplus, Decorative Box, Necktie

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magentacicada384

2 Sep 2014

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Tutorial 9 - monday - july 7, 2014 - 4pm - 5pm. Suppose there are 1,000 identical firms producing diamonds and that the short- run total cost curve for each firm is given by and short-run marginal cost is given by. How many more diamonds would be produced at a price of. 21? (b) suppose that the wages of diamond cutters depend on the total quantity of diamonds produced and the form of this relationship is given by w = . 002q where q represents total industry output, which is 1,000 times the output of the typical firm. In this situation, show that the firm"s marginal cost (and short-run supply) curve depends on q. A perfectly competitive painted necktie industry has a large number of potential entrants. Each firm has an identical cost structure such that the long- run average cost is minimized at an output of 20 units (qi = 20). The minimum average cost is per unit.

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1. A large share of the world supply of diamonds comes from Russia and South Africa. Suppose that the marginal cost of mining diamonds is constant at $2,000 per diamond, and the demand for diamonds is described by the following schedule:

Price Quantity (Dollars) Quantity(Diamonds)

Price Quantity (Dollars)	Quantity (Diamonds)
8000	2000
7000	3000
6000	4000
5000	5000
4000	6000
3000	7000
2000	8000
1000	9000

a)If there were many suppliers of diamonds, the price would be _____ per diamond and the quantity sold would be _____ diamonds.

b)If there were only one supplier of diamonds, the price would be _____ per diamond and the quantity sold would be _____ diamonds.

c)Suppose Russia and South Africa form a cartel. In this case, the price would be _____ per diamond and the total quantity sold would be _____ diamonds. If the countries split the market evenly, South Africa would produce _____ diamonds and earn a profit of _____.

d) If South Africa increased its production by 1,000 diamonds while Russia stuck to the cartel agreement, South Africa's profit would ____ to ______. Why are cartel agreements often not successful?

A. One party has an incentive to cheat to make more profit.

B. Different firms experience different costs.

C. All parties would make more money if everyone increased production.

crimsonhorse399

Competitive firm has a short run total cost function given by:

SRTC = q^2 + 100

The corresponding short run marginal cost function is:

SRMC = 2q

a. If the market price is 60, how much output will th efirm produce?

b. Find the firms profits at this level of output

c. Find the equation of the firms short run supply curve

d. If there are 100 identical firms in the market, find the equation of the industry supply curve.

Thanks in advance

ivorygrasshopper924

Can someone show me how to get the answers on this. I am at a total loss.

1. A perfectly competitive industry has demand curve: P = 100 - .5Q, where Q is total output produced. All firms in the industry have identical technology and face the same cost curve: C(Q) = 500 + 10Q + 0.5Q2 . There are 10 firms in the industry.

a. Derive the supply curve for a typical firm in the industry.

b. Derive the industry supply curve.

c. Find the equilibrium price and quantity.

d. How much profit is the typical firm making?

e. Is this a short run or long run equilibrium? Explain in words and illustrate using graph(s).

ECO200Y5 Study Guide - Final Guide: Economic Surplus, Decorative Box, Necktie

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