Consider a competitive industry and a price-taking firm that produces in that industry. The market demand and supply functions are estimated to be: Demand: Qd = 10,000 ? 10,000P + 1.0MSupply: Qs = 80,000 + 10,000P ? 4,000PIwhere Q is quantity, P is the price of the product, M is income, and PI is the input price. The manager of the perfectly competitive firm uses time-series data to obtain the following forecasted values of M and PI for 2015:
= $50,000 and 
I = $20The manager also estimates the average variable cost function to beAVC = 3.0 ?
0.0027Q + 0.0000009Q2Total fixed costs will be $2,000 in 2015. The optimal level of production for the firm is
A. 1,000
B. 2,000
C. 1,500
D. 2,500
E. none of the above
Answer: B
You might also like to view...
Government fiscal policies that attempt to stimulate aggregate demand are often aimed at reducing cyclical unemployment
a. True b. False Indicate whether the statement is true or false
The Latin phrase economists use that means all else equal is
A. cogito ergo sum. B. caveat emptor. C. carpe diem. D. ceteris paribus.
All of the following are true if a bank in Los Angeles borrows federal funds from a bank in San Francisco except
A. The money multiplier increases for the banking system. B. Lending potential goes up for the Los Angeles bank. C. Lending potential for the banking system does not change. D. Lending potential goes down for the San Francisco bank.
The shift of labor out of agriculture to industry in the United States has tended to:
A. Reduce the rate of productivity growth B. Increase unemployment in the agriculture sector C. Reduce unemployment in the industrial sector D. Increase labor productivity