Suppose we have an individual firm with two factories with the following short run cost functions:...
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Suppose we have an individual firm with two factories with the following short run cost functions: C₁(₁,0) = 2y4+rk C₂02,6)=3y2 +rk How much will the firm produce at each factory if the desired total output of the firm is 200 units? 2. Suppose a firm in a perfectly competitive market has the following short run cost function: C(y,K) = y³ - 8y² + 30y+rk And suppose that r=1 and K= 5. a) Find the short run Marginal Cost function and Average Variable Cost function (Hint: VC = C(y) - C(O)). Show both the MC curve and the AVC curve on a graph. b) At what prices will the firm produce zero output? Explain. c) Clearly indicate the firm's supply curve on your graph. At what price will the firm supply exactly 6 units of output to the market? 3. Consider a perfectly competitive industry with only three firms. The firms have the following supply curves: Y₁ = P, Y2 =p-5, and y3 = 2p respectively. a) Plot each of the supply curves on a graph with price on the vertical axis and quantity on the horizontal axis. Also, plot the resulting market supply curve on the graph. b) Suppose market demand is perfectly inelastic and the quantity demanded is given by D(p) = 15. What is the resulting market equilibrium price and quantity? c) At the equilibrium price, how much does each firm supply? Suppose we have an individual firm with two factories with the following short run cost functions: C₁(₁,0) = 2y4+rk C₂02,6)=3y2 +rk How much will the firm produce at each factory if the desired total output of the firm is 200 units? 2. Suppose a firm in a perfectly competitive market has the following short run cost function: C(y,K) = y³ - 8y² + 30y+rk And suppose that r=1 and K= 5. a) Find the short run Marginal Cost function and Average Variable Cost function (Hint: VC = C(y) - C(O)). Show both the MC curve and the AVC curve on a graph. b) At what prices will the firm produce zero output? Explain. c) Clearly indicate the firm's supply curve on your graph. At what price will the firm supply exactly 6 units of output to the market? 3. Consider a perfectly competitive industry with only three firms. The firms have the following supply curves: Y₁ = P, Y2 =p-5, and y3 = 2p respectively. a) Plot each of the supply curves on a graph with price on the vertical axis and quantity on the horizontal axis. Also, plot the resulting market supply curve on the graph. b) Suppose market demand is perfectly inelastic and the quantity demanded is given by D(p) = 15. What is the resulting market equilibrium price and quantity? c) At the equilibrium price, how much does each firm supply?
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ANSWER 2 a The short run marginal cost SMC function is given by the derivative of the total cost fun... View the full answer
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Taxes And Business Strategy A Planning Approach
ISBN: 9780132752671
5th Edition
Authors: Myron Scholes, Mark Wolfson, Merle Erickson, Michelle Hanlon
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