QUESTION 1 20 pointsSave Answer 1-(a) Dakota is a firm that produces rocking hor

Question

QUESTION 1 20 pointsSave Answer 1-(a) Dakota is a firm that produces rocking horses. The market for rocking horses is perfectly competitive. Dakota's cost function is C+40y +2450. The market price of rocking horses is p-140 The firm's optimal output is and the profit at the optimal level of output is QUESTION 2 10 points Save Answer 1-(b) What will happen to the number of firms in the rocking horse industry in the long run? The number of tims will lecrease The number of firms will remain unchanged The number of firms will increase QUESTION 3 20 pointsSave Answer 1-(c) Now consider the market for rocking horses in the long run. Dakota's level of output in the long run is and the profit is The market price is

Explanation / Answer

Optimal output is 100 and the profit at the optimal output is $2550

1.b)

Option c

The no of firms would be increase as the profit is positive many firms would enter the market looking at the opportunity.

Y C P TR Profit (TR-C) 0 2450 140 0 -2450 10 2900 140 1400 -1500 20 3450 140 2800 -650 30 4100 140 4200 100 40 4850 140 5600 750 50 5700 140 7000 1300 60 6650 140 8400 1750 70 7700 140 9800 2100 80 8850 140 11200 2350 90 10100 140 12600 2500 100 11450 140 14000 2550 110 12900 140 15400 2500 120 14450 140 16800 2350

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