The short run variable costs below are for a firm in a perfectly competitive mar
ID: 1191401 • Letter: T
Question
The short run variable costs below are for a firm in a perfectly competitive market. All firms producing this good have the same costs. The demand is the market demand for the good this firm produces
FIRM MARKET DEMAND
Q VC P Q P Q
1 12 10 500 19 320
2 21 11 480 20 300
3 31 12 460 21 280
4 43 13 440 22 260
5 58 14 420 23 240
6 78 15 400 24 220
7 105 16 380 25 200
8 140 17 360 26 180
18 340 27 160
Find the quantity this firm will produce in the short run if the price of output is $20. If $20 is the short run competitive equilibrium price, find the number of firms in the market.
Explanation / Answer
a) Total Cost = Fixed Cost + Variable Cost. Now if price is $20 then firm cannot produce more that Q=1 as when Q>1 then we see that VC>P which is not a viable option. So When P = 20 then Q = 1.
b) When P=20 then from table of market demand we see that Qunatity demanded is 300
Now no of firms needed = Total quantity demanded / quantity supplied pper firm = 300 / 1 =300
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