Economics Question

timer Asked: Nov 19th, 2016

Question description

Question 1 Wooden tables are produced in a perfectly competitive market. Each firm has a short-run total cost curve of 𝑇𝐢 = 𝑄 3 βˆ’ 12𝑄 2 + 100𝑄 + 1000 where quantity is measured in number of tables per day. The marginal cost of production is given by 𝑀𝐢 = 3𝑄 2 βˆ’ 24𝑄 + 100.

Calculate the price below which a firm in the market will not produce any output (the shutdown price).

Question 2 Assume that the industry for flour tortillas in Denver is perfectly competitive. There are 200 firms. 75 of the firms are β€œhigh-cost,” with short-run supply curves QHC = 5P, while the others are β€œlow-cost,” with short-run supply curves QLC = 8P. Quantities are measured in dozens of tortillas and prices in dollars Answer the following questions:

a. Derive the short-run industry supply curve for tortillas

b. Assume the market demand curve for tortillas is given by QD = 10,000 – 625P. Find the market equilibrium price and quantity.

c. At this price, how many dozens of tortillas are produced by the high- and low-cost firms, respectively?

d. Determine total industry surplus at the equilibrium.

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