ECO 101 Tutorial 7 Questions Summer 2022 Question 1: Suppose that the market price is determined by the market supply and market demand, given by: QB = 2,100 0.5;: Qs = 101) This market is made up of many identical firms. Each ofthese rms has a cost function given by: Costs = $11,000 + Q2 This implies that firms have Marginal Costs given by: MC = 20 Given this, and in the Short-Run: a) What quantity do individual firms choose to produce? b) How many individual firms are operating in this market? c) What are the prots that the firm is making? d) What are the expressions for the rm's: a. Fixed Costs b. Variable Costs c. Average Variable Costs d. Average Total Costs Page 2 of 2 Question 2: Given the previous question: a) Draw the firms: 3. Average Fixed Costs b. Average Variable Costs c. Average Total Costs d. Marginal Costs e. Marginal Revenues b) Will the firm produce in the short-run? Why or why not? QM: Suppose instead that the cost curve faced by individual firms changed from: Costs = $11,000 + (22 To become: Costs = $12,000 + 2Q2 In this question, we do not need to do any more calculations, but will rely on some graphshifting to answer the question. a) Show which of the previous curves we have drawn would change and how they would change. b) What would happen to this rm's optimal level of production? c) What would need to be the case for the optimal level of production to not change here