Question
1. A firm in a perfectly competitive industry has fixed costs of FC=15, marginal costs of MC=5+14q, and average variable costs of AVC=5+7q. (a) What
1. A firm in a perfectly competitive industry has fixed costs of FC=15, marginal costs of MC=5+14q, and average variable costs of AVC=5+7q.
(a) What are the firm's variable costs (VC)? (5 marks)
(b) What is the firm's total cost function? (5 marks)
(c) If the price is $75, how much does the firm supply? (5 marks)
(d) Does the firm continue to supply this quantity in the short-run? (5 marks)
(e) Suppose there exists a standard market demand function from consumers (downward slopping). Please provide a logical discussion about how the market achieves short-run equilibrium. (10 marks)
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