Problem_Set_5

# Problem_Set_5 - (c At what output levels does the MC curve...

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ECON W3211.002 Intermediate Microeconomics Problem Set 5 Due Wednesday, November 3, 2010 1. For each of the following cost functions, ﬁnd the average ﬁxed cost, marginal cost, average variable cost, and average cost. (a) C = 10 + 10 q (b) C = 10 + q 2 (c) C = 10 + 10 q - 4 q 2 + q 3 2. A ﬁrm’s cost curve is C = F + 10 q - bq 2 + q 3 , where b > 0 . (a) For what values of b are cost, average cost, and average variable cost positive? (From now on, assume that all these measures of cost are positive at every output level.) (b) What is the shape of the AC curve? At what output level is the AC minimized?
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Unformatted text preview: (c) At what output levels does the MC curve cross the AC and the AVC curves? (d) Use calculus to show that the MC curve must cross the AVC at its minimum point. 3. Each ﬁrm in a competitive market has a cost function of C = 16 + q 2 . The market demand function is Q = 24-p . Determine the long-run equilibrium price, quantity per ﬁrm, market quantity, and number of ﬁrms. 1...
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