Assignment 3 (Due 03/08, Wednesday) EC203 – Summer 2011 1) Suppose that a perfectly competitive firm has a short-run total cost function STC(Q) = 10 + 40Q + 0.5Q 2 . a. Calculate the price below which the firm will not produce any output in the short run. b. Assume that there are 12 identical firms in the market. Currently, the market demand is Q = 360 - 2P, where Q is the quantity consumed in the market when price is P . What is the short-run equilibrium price? 2) Suppose that in a perfectly competitive market each firm has a long-run marginal cost given by MC(Q) = 100 - 20Q + 3Q 2 and a long-run average cost AC(Q) = 100 - 10Q + Q 2 .The market demand is given by Q = 22500 - 100P. a. What is the long-run competitive equilibrium price in this market? b. How many firms are in this market in a long-run competitive equilibrium? 3) Suppose that a monopoly faces only one buyer with a demand given by P = 30 - Q: The monopoly ʼ s marginal cost is fixed MC = 6. a.
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