1. What is the equation for the firm's average (total) cost [AC] curve? (1) If a firm's output decreases, what happens to its cost per unit [AC(q)]?

2. (A) How is the equation for the demand facing the individual firm modified to allow for the number of firms? (b) What does S stand for? (c) What is the firm's demand if all firms charge the same price?

3. Given that total industry sales [S] are constant and there is no change in the demand or cost conditions, (a) What is the equation of the CC curve [or AC(n)]? (b) If there are more firms, with total sales [S] constant, what happens to industry average total costs? [We move along the CC curve.]

4. (a) What is the equation for the PP curve [or P(n)]? (b) If more firms enter [that is, n increases], what happens to price? [We move along the PP curve.]

5. What is the long-run zero profit equilibrium of the industry?

6. What is the impact of a larger market that comes with more sales opportunities in international markets? [Here, S increases. Which curve moves, and in which direction?]

7. What are the two key benefits from increased international sales if we retain the assumption of the same cost structures for each firm? What are the effects of assuming different cost structures for firms?

Answer rating: 100% (QA)

1 The total cost function of the firm can be written as C F cQ Average cost becomes CQ FQ c as the fixed cost is spread over a larger output average c... View the full answer