Answered: uppose that each firm in a competitive…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: Price Takers And The Competitive Process

Section: Chapter Questions

Problem 6CQ: Suppose that the development of a new drought-resistant hybrid seed corn leads to a 50 percent...

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Suppose that each firm in a competitive industry has the following identical costs:
Total cost: TC = 25+0.25Q2,
where Q is an individual firm’s quantity produced.
The market demand curve for this product is as follow:
Demand: P=60-0.095Q,
where P is the price and Q is the total quantity of the good. Currently.

(i) Identify each firm’s fixed cost, variable cost, and its marginal cost.

(ii) Suppose that there are 10 firms in the market. Construct the market supply function in the short run. Determine the equilibrium price and quantity. (Hint: If each firm’s supply function is Qi= a+bP then the market supply Qm can be the aggregated supply at each price as Qm = Q1+Q2+Q3+...+Qi where Qi is each firm’s supply function.)

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