Question

• Firm XYZ, operating in a perfectly competitive market, can sell as much or as little as it wants of a good at a price of Rs. 32.00 per unit. Its cost function is C = 100 + 8Q + 4Q$^2$. — Determine the firm's profit-maximizing level of output. — Compute its profit. — If the industry demand curve is Q = 400 - 10P. What is the total market demand at the current Rs 32.00 price? — If all firms in the industry have cost structures identical to that of firm XYZ, how many firms will supply the market? — The outcomes in part (i) and (ii) cannot persist in the long run. Explain why. — Find the market's price, total output, number of firms, and output per firm in the long — Comparing the short-run and long-run results, explain the changes in the price and in the number of firms.

          • Firm XYZ, operating in a perfectly competitive market, can sell as much or as little as it wants of a good at a price of Rs. 32.00 per unit. Its cost function is C = 100 + 8Q + 4Q$^2$.

— Determine the firm's profit-maximizing level of output.
— Compute its profit.
— If the industry demand curve is Q = 400 - 10P. What is the total market demand at the current Rs 32.00 price?
— If all firms in the industry have cost structures identical to that of firm XYZ, how many firms will supply the market?
— The outcomes in part (i) and (ii) cannot persist in the long run. Explain why.
— Find the market's price, total output, number of firms, and output per firm in the long
— Comparing the short-run and long-run results, explain the changes in the price and in the number of firms.

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• Firm XYZ, operating in a perfectly competitive market, can sell as much or as little as it wants of a good at a price of Rs. 32.00 per unit. Its cost function is C = 100 + 8Q + 4Q^2.

— Determine the firm's profit-maximizing level of output.
— Compute its profit.
— If the industry demand curve is Q = 400 - 10P. What is the total market demand at the current Rs 32.00 price?
— If all firms in the industry have cost structures identical to that of firm XYZ, how many firms will supply the market?
— The outcomes in part (i) and (ii) cannot persist in the long run. Explain why.
— Find the market's price, total output, number of firms, and output per firm in the long
— Comparing the short-run and long-run results, explain the changes in the price and in the number of firms.

Added by Lisa J.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Manasvee Singh

05/19/2023

Step 1

To find the profit-maximizing level of output, we need to find the level of output where marginal cost (MC) equals marginal revenue (MR). In a perfectly competitive market, the firm's marginal revenue is equal to the market price. Given that the firm can sell as Show more…

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Firm XYZ,operating in a perfectly competitive market,can sell as much or as little as it wants of a good at a price of Rs.32.00 per unit.Its cost function is C=100+8Q+4Q2. - Determine the firm's profit-maximizing level of output. Compute its profit. If the industry demand curve is Q=400-10P.What is the total market demand at the current Rs.32.00 price? - If all firms in the industry have cost structures identical to that of firm XYZ,how many firms will supply the market? The outcomes in part (i) and (ii cannot persist in the long run.Explain why. - Find the market's price,total output,number of firms,and output per firm in the long Comparing the short-run and long-run results,explain the changes in the price and in the number of firms.

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Transcript

00:01 Hello everyone, so the first part of the question says that calculate this firm's marginal cost and for all the output levels except zero, the firm's average variable cost and average total cost.

00:13 Firstly, talking about the total cost, so the total cost is the total expenditure incurred for the production of all the units of the commodity.

00:23 When we subtract the subsequent values of the total cost, we get the marginal cost.

00:27 From the total cost, if we subtract the fixed cost, we get the variable cost.

00:33 So we'll make the tabulation.

00:35 Here we have quantity column, then we have total cost, marginal cost, total variable cost, average variable cost and average total cost.

00:51 Now quantity is given zero, total cost is five.

00:57 Now marginal cost will be 10 minus 5, that is 5.

01:05 Total variable cost, sorry, the marginal cost in this case will be zero, sorry, nothing.

01:13 Total variable cost will be zero.

01:15 Again, same goes with avc and atc.

01:20 Now quantity is one, total cost is given 10.

01:26 I'll just write both of them first.

01:29 That is given us already in the question.

01:34 When quantity is four, total cost is 25.

01:38 When it is five, we have 34 and we have 6 and 45.

01:51 Now marginal cost will be 10 minus 5, that is 5.

02:02 It will be 13 minus 10, that is 3.

02:08 18 minus 13, that is 5.

02:13 25 minus 18, that is 7...

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