Equilibrium price and output in short run and long run

Assignment Help Macroeconomics

Reference no: EM1311177

A firm has short-run total costs given by C(q)=100+2q+q² (hence, MC=2+2q).

a) Find the average total cost and average variable cost as a function of the level of output.

b) If P=25, how much will the firm produce in the short run? What if P=20? [Hint: remember the minimum conditions for a firm to stay open in the short-run]

c) Assuming the firm has the same cost curves in the long-run for q>0 and C (0) =0, how much will it produce in the long-run? [Hint: if you identify the price for which the firm will remain open in the long-run, you can obtain the quantity the firm will produce if it remains open]

d) Given your answer in c), do you think a price of $25 will be likely in the long-run? Why? Explain clearly.

e) The government imposes a fixed tax of $20 on the profits of the firm. Would this tax affect the decisions of the firm in the short-run and long-run? Explain clearly.

Reference no: EM1311177

Questions Cloud

Determine margin of safety in terms of dollars : From the data given compute the Margin of Safety - Determine the margin of safety in terms of dollars

Economic statements related to market structure and pricing : True/False: For each of the following concepts, decide whether it's true or false, and briefly explain why (2-3 sentences). You can also use diagrams if they are helpful. Each correct answer is worth.

Reaction between white phosphorous and oxygen : The reaction between white phosphorous and oxygen produces solid tetra phosphorus decoxide (P 4 O 10 ).

Reaction between solid sodium and iron : The reaction between solid sodium and Iron (III) oxide is one in a series of reactions that inflates an automobile airbag.

Equilibrium price and output in short run and long run : Find out the average total cost and average variable cost as a function of the level of output. Assuming the firm has the same cost curves in the long-run for q>0 and C (0) =0, how much will it produce in the long-run?

Photosynthesis reactions in green plants : Photosynthesis reactions in green plants use carbon dioxide and water to produce glucose (C 6 H 12 O 6 ) and oxygen.

Evaluate break-even point in terms of dollars : From the data given compute the Break Even Point - Evaluate break-even point in terms of dollars

Calculate the level of liquids in the tubes : The ends of two thin glass tubes are stuck in the same pool of water. Although both tubes are thin, one tube has a smaller inside diameter (Tube 1) than the other (Tube 2). Both tubes are made of the same material. Would you expect the level in Tu..

Relationship between elasticity and profit maximizing price : Determine the profit-maximizing prices both firms will charge. In addition, calculate the price-cost margin for each firm and indicate which has more pricing power and why.

User Account

All Pages