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Question

Suppose that the manager of a firm operating in a competitive market

has estimated the firm's average variable cost function to be AVC = 10 -0.030 +0000050


Total fixed cost is $600.


i. What is the corresponding marginal cost function?


ii. Determine the shutdown price of the product that the firm produces.


ii. If the forecasted price is $7 per unit, how much output will the firm produce in the short run? How much profit (loss) will the firm earn?


The market demand curve faced by Cournot duopolies is:


P = 120 - 0.5Q.


where Qp is the market quantity demanded and P is the market price in dollars.


i. Assuming firm A has a constant marginal cost of $20 and firm B has a constant marginal cost of $34. Determine the equilibrium rate of output and profit in the industry.


i. Suppose there are five firms in the industry. Considering identical cost structure for all firms, where total cost is 30Q, what will be the equilibrium rate of output for each of the firms?


ii. How do your results vary in terms of price and output from (i) to (ii) evaluate

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Subject: Business, Economics

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