Question

Econ 308 Fall 2019 Assignment 5 Deadline: Tuesday, Dec. 10th, 2019 1. Suppose a firm's total cost function is given by TC = 6,000 + 20 +0.250, where MC- 2 +0.50 a. What is the output level that minimizes total cost? b. What is the output level that minimizes average total cost? 2. A perfectly competitive industry in long-run equilibrium comprises 200 identical firms. In one of the firms, the workers unionize and receive a 20% wage increase. What happens to the unionized firm in the short run and the long run? Supplement your answer with a graph. 3. Suppose there is a perfectly competitive industry where all the firms are identical with identical cost curves. Furthermore, suppose that a representative firm's total cost is given by the equation TC 100+q* + q where q is the quantity of output produced by the firm. You also know that the market demand for this product is given by the equation P = 1000 - 20 where Q is the market quantity. In addition you are told that the market supply curve is given by the equation P-100+ Q. a. What is the equilibrium quantity and price in this market given this information? b. The firm's MC equation based upon its TC equation is MC = 2q + 1. Given this information and your answer in part (a), what is the firm's profit maximizing level of production, total revenue, total cost and profit at this market equilibrium? Is this a short-run or long-run equilibrium? Explain your answer. c. Given your answer in part (b), what do you anticipate will happen in this market in the long-run? d. In this market, what is the long-run equilibrium price and what is the long-run equilibrium quantity for a representative firm to produce? Explain your answer. e. Given the long-run equilibrium price you calculated in part (d), how many units of this good are produced in this market?

Answer 1

Thus Tata Wst is increaning in Oty. total cost is minimized at 8-0 Acate - 6000 +2 +0.250 b) o - 6ooo +0.25 0 02= 6000 guo 0.25 = o = 154.919 Ac is mincinized at 0=104.919