EC120 Lecture Notes - Lecture 4: Demand Curve, Diminishing Returns, Longrun

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3 Oct 2020

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31 lomoar cpsd| 5490467- at any given price, add up quantity of supply of all firms. Market supply is number of firms multiplied by firm-level supply. In the long-run, all costs are variable. In the long run, if a firm produces nothing: profit(0) = 0 - in a firm produces anything: profit(1) = p * q - tc. Long run firms can enter and exit the industry. Assume all firms have access to the same technology - if existing firms are profitable, new firms will enter. If existing firms are marking a loss, some firms will exit - entry/exit firms earn zero profits in the long-run. Long-run market supply at minimum of atc curve. Supply curve is upward sloping because of diminishing marginal product - in the long run. Firms enter/exit until firms make zero profit. Supply curve is horizontal at minimum of atc curve - demand changes. Short run: follows usual supply and demand rules.

Related Questions

What determines the entry and exit of firms in a perfectly competitive industry in the long run? In a perfectly competitive industry in the long run,

A. new firms cannot enter the market due to barriers but existing firms will exit if they are experiencing losses.

B. new firms will enter if market demand exceeds market supply and existing firms will exit if market supply exceeds market demand.

c. new firms will enter if existing firms are making a profit and existing firms will exit if they are breaking even or experiencing losses.

D. new firms will enter if existing firms are making a profit and existing firms will exit if they are experiencing losses.

E. new firms will enter if the price is above the shutdown point and existing firms will exit if the price is below the shutdown point.

coffeeprairie-dog9

Your firm is one of 100 identical firms operating in the short run in a perfectly competitive market. Your total cost function (short run and long run) is C = 800 + 25 q + 0.5 q2, and your marginal cost function is MC = 25 + q. The (short run and long run) market demand curve is given by Q = 2,750 â 5P. a.Find the supply curve for your firm. Show work. Then, find the short-run market supply curve. Show work. b.Find equilibrium price, P*, and quantity, Q*, in the market in the short run.Show work. c.Find the lowest price at which your firm will not exit the market in the long run.Show work. Referring to your answer in part b, should your firm exit the market in the long run if P* in the market does not increase over time?Explain. d.If you choose not to exit, how many firms (including your own) do you expect to be in the market in the long run?Show work, and explain.

lavenderotter524

Suppose that each firm in a competitive industry has the following costs:

Total Cost: TC=50+1/2 q2

Marginal Cost: MC=q

where q is an individual firm's quantity produced.

The market demand curve for this product is:

Demand QD=140-2P

where P is the price and Q is the total quantity of the good.

Each firm's fixed cost is $__________

What is each firm's variable cost?

_______ 50+1/2q

_______1/2q

_______q

_______1/2q2

Which of the following represents the equation for each firm's average total cost?

_____ 50/q

_______ 50/q+1/2q

_______1/2q

_______50+1/2q

Complete the following table by computing the marginal cost and average total cost for from 5 to 15.

5
6
7
8
9
10
11
12
13
14
15

The average total cost is at its minimum when the quantity each firm produces (q) iquals ________

Which of the following represents the equation for each firm's supply curve in the short run?

_______1/2q2

______q

_____50-q

_____120-1/2q2

In the long run, the firm will remain in the market and produce if________

Currently, there are 8 firms in the market.

In the short run, in which the number of firms is fixed, the equilibrium price is__________ In the short run, in which the number of firms is fixed, the equilibrium price is

________units. Each firm produces ________ nits. (Hint: Total supply in the market equals the number of firms times the quantity supplied by each firm.)

In this equilibrium, each firm makes a profit of _______ . (Note: Enter a negative number if the firm is incurring a loss.)

Firms have an incentive to EXIT/ENTER the market.

In the long run, with free entry and exit, the equilibrium price is _______and the total quantity produced in the market is__________units. There are ________

firms in the market, with each firm producing _________units.

orchidbadger835

EC120 Lecture Notes - Lecture 4: Demand Curve, Diminishing Returns, Longrun

EC120 Full Course Notes

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