Suppose you are given the following information about a particular industry: QD

Question

Suppose you are given the following information about a particular industry: QD = 8500-200P Market demand Qs = 1500P Market supply C(q) = 601 + q2/400 Firm total cost function MC(q) = 2q/400 Firm marginal cost function. Assume that all firms are identical and that the market is characterized by perfect competition. Find the equilibrium price, the equilibrium quantity, the output supplied by the firm, and the profit of each firm. The equilibrium price is $ (Enter your response rounded to two decimal places.)

Explanation / Answer

Market is in equilibrium when

QD = QS

8500 - 200P = 1500P

200P = 7000

P = 35

Q = 1500 x 35 = 52,500

Each firm equates this price with its MC:

35 = 2q / 400

q = 7,000 (Firm output)

TC(q) = 601 + (7000 x 7000 / 400) = 123,101

Total revenue, TR = P x q = 35 x 7,000 = 245,000

So, firm profit = TR - TC(q) = 245,000 - 123,101 = 121,899

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.