Question

1. Assume the market for bicycles is perfectly competitive. The market supply and demand curves for bicycles are given as follows: Supply curve: P = 3Q Demand curve: P = 120 - 5Q The marginal cost curve for a typical bicycle factory is: MC = 9q a. [1 mark] Determine the equilibrium price for bicycles. b. [1 mark] Determine the profit-maximizing equilibrium level of output for a bicycle factory. c. [1 mark] At the level of output determined above, is the factory making a profit, breaking even, or making a loss? Explain your answer. d. [2 marks: Market output, number of firms] Assuming that all of the bicycle factories are identical, how many bicycle factories are producing bicycles? e. [1 mark] Determine the producer surplus the typical firm has under the conditions described above.

          1. Assume the market for bicycles is perfectly competitive. The market supply and demand
curves for bicycles are given as follows:
Supply curve:
P = 3Q
Demand curve:
P = 120 - 5Q
The marginal cost curve for a typical bicycle factory is:
MC = 9q
a. [1 mark] Determine the equilibrium price for bicycles.
b. [1 mark] Determine the profit-maximizing equilibrium level of output for a bicycle
factory.
c. [1 mark] At the level of output determined above, is the factory making a profit, breaking
even, or making a loss? Explain your answer.
d. [2 marks: Market output, number of firms] Assuming that all of the bicycle factories are
identical, how many bicycle factories are producing bicycles?
e. [1 mark] Determine the producer surplus the typical firm has under the conditions
described above.

1. Assume the market for bicycles is perfectly competitive. The market supply and demand
curves for bicycles are given as follows:
Supply curve:
P = 3Q
Demand curve:
P = 120 - 5Q
The marginal cost curve for a typical bicycle factory is:
MC = 9q
a. [1 mark] Determine the equilibrium price for bicycles.
b. [1 mark] Determine the profit-maximizing equilibrium level of output for a bicycle
factory.
c. [1 mark] At the level of output determined above, is the factory making a profit, breaking
even, or making a loss? Explain your answer.
d. [2 marks: Market output, number of firms] Assuming that all of the bicycle factories are
identical, how many bicycle factories are producing bicycles?
e. [1 mark] Determine the producer surplus the typical firm has under the conditions
described above.

Added by Rhonda R.

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