Q represents market quantity and q represents firm

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Intermediate Algebra
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Chapter 6 / Exercise 71
Intermediate Algebra
Mckeague
Expert Verified
Q represents market quantity and q represents firm quantity. a) Given the above information write an equation for the market supply curve. Explain how you found this equation. b) Given the market supply curve you found in (a), calculate the short run market equilibrium quantity and price in this market. How many units of output will the representative firm produce in the short run? Calculate the short-run profits for the representative firm. Explain your work. c) Given your calculations in (b), will the representative firm produce in the short-run? Explain your answer. d) Given your answer in (b), what do you predict will happen in the long-run in this industry? e) Given no changes in the firm’s cost curves or the market demand curve, calculate the following and explain how you found your answers: Long-run equilibrium market price = _________________________ Long-run equilibrium market quantity = _______________________ Level of production by the representative firm = ___________________ Approximate number of firms in industry in the long-run (this will not be a whole number) = _________________ 3. Consider a monopoly that produces widgets. Suppose you are told that the monopoly has the following cost curves where TC is total cost measured in dollars, Q is the quantity of widgets, and P is the price per widget in dollars: Total Cost: TC = 4 + 4Q + Q 2
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Intermediate Algebra
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Chapter 6 / Exercise 71
Intermediate Algebra
Mckeague
Expert Verified
3 Marginal Cost: MC = 4 + 2Q Suppose you also know that the market demand curve is given by the following equation: Market Demand: P = 19 – (1/2)Q a) Given the above information, what is this monopolist’s equation for MR? b) Determine the profit maximizing level of production for this monopolist as well as the price that will be charged for each unit of the good. Assume that this is a single price monopolist, i.e. the monopolist cannot engage in price discrimination. Explain how you found your answer. c) Given the above information and your answer in (b) calculate the level of profit in the short- run for this monopolist. Explain how you found your answer. d) Given your answer in (c), what do you predict will happen to this monopolist in the long-run? e) Calculate the deadweight loss that results from this market being served by a monopolist. Show how you found your answer. Provide a graph that is well labeled to illustrate your answer. 4. Use the following graph of a natural monopolist to answer this next question. The graph depicts the market for a monopolist where LRATC is the long-run average total cost curve, MC is the marginal cost curve, and Demand is the market demand for the product. You are also told that the reciprocal of the slope of the market demand curve is -5. a) Given the above information and the graph, write the equation for the market demand curve in slope intercept form. Explain how you found your answer. You will need to provide a numeric value for “A” in the above graph. b) Suppose that this monopolist is not regulated. Explain how this monopolist will determine its profit maximizing output and price. Assume that the monopolist is a single price monopolist. After explaining the process, identify the unregulated monopolist’s quantity and price on the graph labeling the quantity (F) and the price (G). Note: you will not be able to actually compute F and G – just label them on a well-drawn diagram.

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