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MGEB02H3 Lecture Notes - Lecture 6: Economic Equilibrium, University Of Toronto Scarborough, Average Variable Cost

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apricoteagle728
10 Sep 2018
School
UTSC
Department
Economics for Management Studies
Course
MGEB02H3
Professor
A.Mazaheri

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Document Summary

Mgeb02: price theory: a mathematical approach (intermediate microeconomics i) Chapter 8: 4, 5, 7, 8, 10, 12, 15. Supplemental: short questions, the short-run total cost of a perfectly competitive firm is given by stc(q)=500+3q+q2. Derive the short-run supply function of the firm, including the shutdown conditions: the area under the marginal cost curve measures total variable costs. Explain: a profit-maximizing competitive firm continues to operate even though it is losing money. It sells its product at a price of . Then the firm"s average variable cost must be higher than : a firm has the long run cost function c(q) = 3q2 + 27. Therefore this firm will supply a positive amount of output as long as the price is greater than : the demand for pizzas in the local market is given by: qd = 25,000 - 1,500p. The long-run cost function for each pizza firm is:

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Related Questions

  If a firm is a price taker,

STC = 15q2 + 8q + 45

SMC = 30q + 8

a) Find the firm's fixed cost and variable cost, average total cost, and average variable cost in the short-run.

b) Find the firm's short-run supply curve function.

c) If P = 15 is given, what is the optimal output level for this firm to maximize its profit?

d) Does this firm have a shutdown price?

Competitive firm has a short run total cost function given by:

SRTC = q^2 + 100

The corresponding short run marginal cost function is:

SRMC = 2q

a. If the market price is 60, how much output will th efirm produce?

b. Find the firms profits at this level of output

c. Find the equation of the firms short run supply curve

d. If there are 100 identical firms in the market, find the equation of the industry supply curve.


Thanks in advance

The daily demand for travel at a small regional airport is initially QD = 1000 - p; where quantity is in passengers and price is in dollars per passenger. There are initially 10 price-taking firms serving this market and each of them has the production function: q = sqrt (lk) where q is in passengers, and labor and capital are in some appropriately specified units. The price of a unit of labor is w = 100 per day; the price of a unit of capital is v = 100 per day, and this industry has constant costs. Each firm initially has a capital stock of k0 = 80. day; and this industry has constant costs. Each firm initially has a capital stock of k0 = 80.

(a) Derive the short-run cost function, SC(q), for each firm in the market.

(b) Derive the short-run market supply function, QS.

(c) Find the short-run competitive equilibrium price, p*, and quantity, Q*. How much labor, L*, does the industry employ at the competitive equilibrium?

(d) Derive the long-run cost function, C(q), of each firm in the industry.

(e) Describe the long-run market supply curve. Does the short-run competitive equilibrium at (Q*; p*) also correspond to a long-run competitive equilibrium? Explain why or why not.

Now, imagine that a catastrophic event causes the daily demand for air travel in this market to fall unexpectedly to ~QD = 750 - p Continue to assume that each of the 10 firms has a capital of k0 = 80 in the short run.

(f) Find the new short-run competitive equilibrium price, p**, and quantity, Q**, in this market. How much labor, L**, does the industry employ in the new short-run competitive equilibrium?

(g) What is the new long-run competitive equilibrium price, p***, and quantity, Q***? Describe what must happen as the industry moves from the short-run competitive equilibrium at (Q**; p**) to the long-run competitive equilibrium at (Q***; p***). How much labor L*** does the industry employ at the new long-run equilibrium?