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7 Apr 2018

If firms in a competitive market have different cost functions, then

  A.

there is no short-run market supply curve.
  B.

the market supply curve reflects those firms' operating envelopes, even in the short run.
  C.

some of the firms will shut down because their costs are too high to compete.
  D.

the firms' marginal costs will be different at the market price.

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Related questions

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

In a competitive market with identical firms:

a. free entry and exit into the market require that firms earn zero economic profit in the long-run even though they may be able to earn positive economic profit in the short-run. 

b. firms can earn positive economic profit in the long-run if the long-run market supply curve is upward-sloping. 

c. an increase in demand in the short-run will result in a new price above the minimum average total cost, allowing firms to earn a positive economic profit in both the short-run and long-run. 

d. firms cannot earn positive economic profit in either the short-run or long-run. 

In a competitive market with identical firms:

1. free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.

2. firms can earn positive economic profit in the long run if the long-run market supply curve is upward sloping.

3. an increase in demand in the short run will result in a new price above the minimum of average total cost, allowing firms to earn a positive economic profit in both the short run and the long run.

4. firms cannot earn positive economic profit in either the short run or long run.

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