Problems and Applications Q11 Suppose that each firm in a competitive industry has the following costs:

Total Cost: TC=50+12q2TC=50+12q2
Marginal Cost: MC=qMC=q
where qq is an individual firm's quantity produced.

The market demand curve for this product is:

Demand QD=140?2PQD=140?2P
where PP is the price and QQ is the total quantity of the good.

Each firm's fixed cost is.

What is each firm's variable cost?

12q212q2

qq

50+12q50+12q

12q12q

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

50q50q

50+12q50+12q

50q+12q50q+12q

12q12q

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

q Marginal Cost Average Total Cost
(Units) (Dollars) (Dollars)
5 12.50
6 11.33
7 10.64
8 10.25
9 10.06
10 10.00
11 10.05
12 10.17
13 10.35
14 10.57
15 10.83
The average total cost is at its minimum when the quantity each firm produces (qq) equals .

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

50?q50?q

12q212q2

qq

120?12q2120?12q2

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 isand the total quantity produced in the market isunits. Each firm producesunits. (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 the market.

In the long run, with free entry and exit, the equilibrium price isand the total quantity produced in the market isunits. There arefirms in the market, with each firm producingunits.