Firm Z, operating in a perfectly competitive market, can sell as much or as little as it
Question:
Firm Z, operating in a perfectly competitive market, can sell as much or as little as it wants of a good at a price of $16 per unit. Its cost function is C=50+ 40+20.
The associated marginal cost is MC 4+4Q and the point of minimum average cost is Qmin =5.
a. Determine the firm's profit-maximizing level of output. Compute its profit.
b. The industry demand curve is Q-200-5P. What is the total market demand at the current $16 price? If all firms in the industry have cost structures identical to that of firm Z, how many firms will supply the market?
c. The outcomes in part a and b cannot persist in the long run. Explain why. Find the market's price, total output, number of firms, and output per firm in the long run.
d. Comparing the short-run and long-run results, explain the changes in the price and in the number of firms.
Step by Step Answer:
Managerial Economics
ISBN: 9781119554912
5th Edition
Authors: William F. Samuelson, Stephen G. Marks