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Question: In the model of perfect competition, all firms are price-takers since they treat price as a market-determined constant. Firm Perfcomp's total revenue function is
TR(Q) = P.Q,
in which P equals the output price. Assume that P = 12 and the total cost function is
TC(Q) = Q3 - 4.5Q2 + 18Q - 7.
a) Determine the firm's profit function and the level of output at which Firm Perfcomp should produce in order to maximize profits. Confirm that this quantity represents maximum profits for the firm by using the second-order condition.
b) According to microeconomic theory, perfectly competitive firms will maximize profits by producing at the quantity where price equals marginal cost and where the slope of the marginal revenue curve is less than that of the marginal cost curve. Show that the theory holds in this example.
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Grade-school education is said to yield a beneficial externality because all of us benefit from interacting with people who know basic reading and writing.
Analyze What is the equilibrium Price and Quantity in the market? What would happen to the price and quantity in this market?
If firms in a competitive market are making a negative economic profit, then there is an incentive for firms to enter the market.
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3. Xander Harris is considering whether to buy a corn and soybean farm in Iowa. The farm will cost $800,000, and Xander will be able to pay this from profits his recently deceased mother made on the stock market and willed to him. He estimates ..
In most production processes the short run average cost of production typically drops as more is produced, but eventually, it tends to rise.
Suppose that you have two straights lines, Line A and Line B. The points (x, y) = (2, 6) and (4, 2) lie on Line A. The points (x, y) = (1, 9) and (3, 3) lie on Line B. What is the point of intersection between Line A and Line B
Why should firms in the airline industry pay more attention tomacro-economic business environments? (Use either U.S. airline carriers and/ or companies.
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