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58 - Homevvork l ECON 445 Summer Session II 2010 Due Date...

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Unformatted text preview: Homevvork l ECON 445 Summer Session II 2010 Due Date: Friday June 25, 2010 in class at 11:30 AM. 1 Consider the perfectly competitive market for frisbees in Chapel Hill. It is known that the demand for frisbees is given by: D(P) : A—BP Where A and B are strictly positive constants. In this market there are N identical firms, each with cost function: C(61) = F+ hq+wq2 where P, h, and w are positive constants. a) Find an individual firm’s supply function as a function of price and con— stants. That is, find the firms optimal choice of output given market price (and all the constants). b) Determine the aggregate supply function for this industry. The aggregate supply is simply the sum of all the individual firms supply function for a given industry. c) From this point of the question on,‘ let h z 0. Solve for the market price and equilibrium quantity of frisbees. Using the market equilibrium quantity, also compute an individual firm’s output in equilibirum. (1) Now let A = 20, B : 1, F 2 $12, N = 2 and w : $4. Calculate a firm’s profit in this industry in equilibrium. Ibo ’49 1 lie 13"” i _,——-— \ a 3 ...
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