A medical facility is faced with the following information concerning each MRI t

Question

A medical facility is faced with the following information concerning each MRI they provide.

Q=2100-.5P       MR=4200-4Q       TC=400Q+5000     MC=$400

1.       Is this a perfectly competitive firm or a non-perfectly competitive firm? WHY?

2.  
a.   If this is a perfectly competitive firm what will happen for them to achieve their long run profit position? What is the profit position(s)?

b.   If this is a monopolistic competitive firm what will happen for them to achieve their long run profit position? What is the profit position(s)?

c.   If this is a monopoly what will happen for the firm to achieve their long run profit position? What is the profit position(s)?

d.   If this is an oligopoly what will happen for the firm to achieve their long run profit position? What is the profit position(s)?

3.   Assume the government places a price control at P=$1500:
a.   What kind of price control is this?
b.   Give a positive statement concerning this price control.
c.   Give a normative statement concerning this price control.
d.   What will happen to the market when this price control is in place?

Explanation / Answer

3. A) This is a PRICE CEILING.

B) A price ceiling above the equilibrium price has no effect on quantity supplied.

C) The price ceiling is too low from the equilibrium price.

D) The price ceiling creates a shortage when the price is below the market equilibrium price.

1. The firm is non perfectly competitive because MR curve is downward sloping.

2. The firm will earn supernormal profits in the shorter run, but in long run it will earn normal profits.

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