ANSWER ALL QUESTIONS...ALL FOUR QUESTIONS.....REPEAT ANSWER ALL FOUR!!!!!!!!! AL

Question

ANSWER ALL QUESTIONS...ALL FOUR QUESTIONS.....REPEAT ANSWER ALL FOUR!!!!!!!!!

ALL 4 QUESTIONS...

Please EXPLAIN ALL four parts of the question.... thanks

Suppose the market demand and supply functions are QD = 170 – 2.5P and QS = 5P - 115. You have just graduated and moved to this city; as a new MBA and an entrepreneur, you are considering entering the market for this product.

1.   Determine the equilibrium price and quantity in this market.

2.   You’ve researched and found that most firms in the market currently experience costs such that TC = 10 + 60Q – 17Q2 + 3Q3. Determine whether or not you should enter this market. Use graphs to support your answer.

3.   Due to unforeseen delays, you don’t enter the market. However, a year later the market supply has changed to QS = 5P - 145. Are you surprised at this shift in supply?

4.   Given the new supply conditions, determine whether or not you should enter the market.

Explanation / Answer

1. We have

QD=QS

179-2.5P=5P-115

265= 7.5P

P=38 (equilibrium price)

Q= 5x38-115

=75 (equlibrium quantity)--------------------------------1.

2) TC=10+60Q-170Q2+3Q3

MC= d TC/dP

=60-34Q+9Q

= 60-2550+675

Marginal cost is negative. That shows negative returns. Hence one should not enter the market

3) We have

170 -2.5P= 5P-145

315=7.5P

P=42--------------------------------------2

2 is less than 1. Hence price has decreased, so supply has increased and demand has decreased. Thus the good is unit elastic which is average.

4) MC= 60x 34x65+9x65

=60-2210+585

MC<), hence one should not enter market.

By,

Nishant Bhatt

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