A competitive industry consists of 100 firms. The short-run marginal cost curve for each firm is given by MC = 200 + .3Q. The demand curve faced by the industry is given as P = 400 - .1Q. How much profit is each firm making if fixed costs are $375 per firm?
What will be an ideal response?
This question requires one to go from the MC to the total cost curve which will be TC = 200Q + 15Q + 375. Total costs are $1,750 per firm and revenue is $350 × $5 which is $1,750. Thus no economic profit exists.
You might also like to view...
The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is regulated, what is its economic profit if it must follow an average cost pricing rule?
A) -$60 B) -$20 C) $0 D) $30
If business taxes rise in a large open economy, it causes the current account to ________ and saving to ________
A) fall; fall B) rise; remain unchanged C) fall; remain unchanged D) rise; fall
If an economy produces 4,000 units of output with a price level of $2 and with a velocity of money of 8, we know that the money supply must be:
A. $1,000. B. $8,000. C. $2,000. D. $4,000.
Deepening of human capital in the U.S. economy focuses: a. more on additional education and training than on a higher average level of work experience. b. more on a higher average level of work experience than on additional education and training. c. more on the reduction of the cost of capital than on additional training
d. more on increasing the stock of physical capital than on higher education.