# ch8_example3 - Suppose you are given the following...

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Suppose you are given the following information about a particular industry:   Q D = 6500 - 100 P M arket demand Q S = 1200 P M arket supply C ( q ) = 722 + q 2 200 F irm total cost function MC ( q ) = 2 q 200 F irm marginal cost function . Assume that all firms are identical, and that the market is characterized by pure  competition. a. Find the equilibrium price, the equilibrium quantity, the output supplied  by the firm, and the profit of the firm. Equilibrium price and quantity are found by setting market supply equal to  market demand, so that 6500-100P=1200P.  Solve to find P=5 and plug back  into either equation to find Q=6000.  To find the output for the firm set price  equal to marginal cost so that  5 = 2 q 200  and q=500.  Profit of the firm is total  revenue   minus   total   cost   or   Π = pq - C ( q ) = 5 (50 0 ) - 72 2 - 50 0 2 20 0 = 52 8 .

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ch8_example3 - Suppose you are given the following...

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