hw4 - Homework 4 Econ 3101.04: Intermediate Microeconomics...

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Homework 4 Econ 3101.04: Intermediate Microeconomics Deniz Cicek This homework is due on Friday, November 7 in class. The maximum score is 105 points. Be sure to review the syllabus for details about homework assignments and their grading! Note that some exercises have several parts, and each part may conceal more than one task for you. Be sure to answer every question thoroughly for full credit! Answer questions in order and put all graphs in the same area as your answer. Graphs should be neatly drawn and fully labelled. Clearly circle any numerical solutions. Exercise 1 (15 points) In a competitive market the short-run cost function for each firm is given by C ( q ) = 0 . 5 q 2 - 10 q + 200. Suppose there are 30 firms in the industry. (a) Calculate the short-run average cost, average variable cost and marginal cost functions. (b) Calculate the short-run supply function for each firm and the industry supply function. (c) Suppose the market demand is given by Q = 1500 - 50 P . Find the equilibrium price and quantity. (d) Accurately graph the supply and demand diagram. Show the short-run equilibrium on the graph. Exercise 2 (30 points) A perfectly competitive industry has a large number of potential entrants. Each firm has an identical cost structure such that long-run average cost is minimized at an output of 20 units ( q i = 20). The minimum average cost is $40 per unit. Total market demand is given by Q = 2000 - 20 P .
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This note was uploaded on 08/31/2011 for the course STAT 3101 taught by Professor Erick during the Spring '11 term at Minnesota.

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hw4 - Homework 4 Econ 3101.04: Intermediate Microeconomics...

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