Exam 8: Competitive Firms and Markets

All firms in a competitive industry have the following long-run total cost curve: C(q)= q³ - 10q² + 36q where q is the output of the firm. a.Compute the long run equilibrium price.What does the long-run supply curve look like if this is a constant cost industry? Explain. b.Suppose the market demand is given by Q = 111 - p.Determine the long-run equilibrium number of firms in the industry.

If transaction costs are high,then it is more likely a firm's demand curve is downward sloping.

All the supply of peppermint oil is produced from mint plants grown in one county by several competitive growers (the number of growers is not limited).The quality of land in the county varies greatly.Would you expect the long-run market supply curve to slope upward,downward,or remain constant? Why?

Suppose there are 1000 identical wheat farmers.For each,TC = 10 + q².Market demand is Q = 600,000 - 100p.Derive the short-run equilibrium Q,q,and p.Does the typical firm earn a short-run profit?

-The above figure shows the cost curves for a typical firm in a competitive market.Note that if p = 10,then MC = p at both q = 5 and q = 60.Can they both yield maximum profit? Explain.

Consider a competitive firm with the short-run cost function C(q)= 20 + 6q + 5q² The firm faces a market price of p for its output. a.Derive the firm's profit maximizing condition.Is the sufficient second order condition satisfied? b.Suppose a specific tax of t (t < p)is levied on only this firm in the industry.What is the profit maximizing level of output as a function of p and t? (Assume the price is high enough that the firm does not shut down) c.How does the output change as the tax increases? Use calculus to determine the relevant comparative static. d.How does the firm's profit chance as the tax increases? Again,use calculus to determine the relevant comparative static.Show that profit decreases as t increases.

-The above figure shows the cost curves for a competitive firm.If the firm is to earn economic profit,price must exceed

-The above figure shows the short run cost curves for a typical firm in a competitive market.If price = 4,then the firm

If a firm is operating at an output level where losses are minimized,the firm

Draw a graph that shows how the short-run shut-down price changes when an input price increases.

-Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at 20¢ per pound when 500 pounds are grown.The demand for potatoes is Q = 10,000/p.If the long-run supply curve is horizontal,then how many firms will this industry sustain in the long run?

Suppose the fixed cost of Christmas trees business is $7,000 and sunk.The variable cost for each tree is $20.According to the forecast,the market price for Christmas trees is $25 each and the owner could sell 1000 trees at most each year.The owner

Suppose TC = 10 + (0.1 ∗ q²).If there are 100 identical firms in the market,the market supply curve is

There are 10 identical internet service providers (ISPs)in a city serving a market demand with an elasticity of -1.5.The elasticity of supply for each firm is 3.0.The elasticity of demand faced by an individual ISP is

Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at 20¢ per pound when 500 pounds are grown.The demand for potatoes is Q = 10,000/p.If the long-run supply curve is horizontal,then how much will consumers spend,in total,on potatoes?

Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at 20¢ per pound when 500 pounds are grown.If the long-run supply curve is horizontal,then

When the production of a good involves several inputs and inputs are used in fixed proportions,an increase in the cost of one input will usually cause total costs to

If a competitive firm has to pay a lump sum tax,it will produce less.

The demand curve an individual competitive firm faces is known as its

The residual demand curve is