The market supply and demand equations for plywood are given by Q S = 20,000 + 3
ID: 1206490 • Letter: T
Question
The market supply and demand equations for plywood are given by QS = 20,000 + 30 P and QD = 40,000 - 20 P The plywood industry is perfectly competitive and the marginal cost equation for one of the suppliers, High Country Plywood Corp, is given by MC = 200 + 4 Q and the average cost is AC = 1,000/Q + 200 + 2 Q What is the short-run profit-maximizing rate of output for the High Country Plywood Corp? In the short run, how much economic profit will the firm earn? The market supply and demand equations for plywood are given by QS = 20,000 + 30 P and QD = 40,000 - 20 P The plywood industry is perfectly competitive and the marginal cost equation for one of the suppliers, High Country Plywood Corp, is given by MC = 200 + 4 Q and the average cost is AC = 1,000/Q + 200 + 2 Q What is the short-run profit-maximizing rate of output for the High Country Plywood Corp? In the short run, how much economic profit will the firm earn?Explanation / Answer
Equilibrium price at Qd=Qs
20,000 + 30P = 40,000 - 20P
50P = 20,000
P = 400
P=MC for profit max condition
400 = 200 + 4Q
4Q = 200
Q = 50 units
TR = 50*400 = 20,000
TC = 1000 + 200*50+2*50*50 = 16000
Profits= TR-TC = 20000-16000 = 4000
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