Joe Green operates a construction firm, Joes Construction Company, Inc., that specializes in the production of small manufactured micro homes. Joes cost schedule is presented below.

Homes per month Total Cost per month

0 30,000

1 60,000

2 90,000

3 120,000

4 150,000

5 183,000

6 221,000

7 264,000

8 312,000

9 365,000

10 423,000

The current market price for micro homes of the quality produced by Joes Construction is $52,000. Assume Joe wants to maximize profits. How many homes should he produce per month? What is his profit (or loss)?

b) Indicate Joes output and maximum profit (or minimum loss) if the market price fell to $37,000; to $32,500. Should Joe continue in business at the latter price? Explain.

Market conditions stabilize in the area served by Joes Construction Firm. The market demand schedule for homes of the quality produced by Joe is given below.

Price Quantity Demanded Quantity Supplied

$32,000 850

37,000 700

42,000 600

47,000 500

52,000 450

c) Suppose there are 100 competitive firms--including Joes Constructionthat supply the area. Each firm has the same cost conditions as Joes firm. Fill in the supply schedule above.

d) Indicate the short run market clearing price.

e) Given competitive conditions, what will happen to the market price with time? Explain.

Please explain how you came to the conclusion of these answers