# h4s10 - d Find the long run competitive equilibrium price...

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ECO 304K INTRO MICRO SPRING 2010 Hickenbottom HOMEWORK #4 (Due March 31) 1. The short run variable costs below are for a firm in a perfectly competitive market. All firms producing this good have the same costs. The demand is the market demand for the good this firm produces. FIRM MARKET DEMAND q VC P Q P Q 1 12 10 500 19 320 2 21 11 480 20 300 3 31 12 460 21 280 4 43 13 440 22 260 5 58 14 420 23 240 6 78 15 400 24 220 7 105 16 380 25 200 8 140 17 360 26 180 18 340 27 160 a) Explain why, from this data, you cannot tell whether or not the firm will produce at a price of \$20 in the long run, but you can tell whether or not they will produce at a price of \$20 in the short run. (2 points) b) If \$20 is the short run competitive equilibrium price, find the number of firms in the market. (1 point) c) If fixed costs are 5, explain what will happen to the number of firms and market price as the market transitions to long run equilibrium. (1 point)
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Unformatted text preview: d) Find the long run competitive equilibrium price and number of firms. Assume that the firm is at the most efficient LR plant size. (2 points) 2. For the production schedule of a perfectly competitive firm given below, answer the following: Lab. Out. Lab. Out. 1 7 6 54 2 16 7 60 3 27 8 64 4 37 9 67 5 46 10 69 a) Calculate the MRP curve if the price of output is \$5. Find the profit maximizing level of labor if the wage is \$30. Also find the maximum profit of the firm if fixed costs are \$100 and labor is the only source of variable costs. (1 point) b) Find the new quantity of labor if (i) only the wage doubles. (ii) only the output price doubles. (iii) both wages and output prices double. (2 points)...
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