Question 1

Consider a firm with a long-run total cost function $$TC = 2,000 + 20q + 5q^2$ operating in a perfectly competitive industry. If the market demand is given by QD = 10$$,000 - 40P$$, what is the long-run equilibrium number of firms in the industry?

Accepted Answer

60 firms

Question 2

Given the cost function $$TC = 2,000 + 20q + 5q^2$ and the market demand QD = 10$$,000 - 40P$$, what is the long-run equilibrium output of the industry?

Accepted Answer

1,200 units

Question 3

For the cost function $$TC = 2,000 + 20q + 5q^2$, what is the marginal cost (MC) function?

Accepted Answer

$$MC = 20 + 10q$$

Question 4

If the long-run equilibrium price in a perfectly competitive market equals the minimum average cost, what is the minimum average cost for a firm with $$TC = 2,000 + 20q + 5q^2$?

Accepted Answer

$$AC_{min} = 50$$

Question 5

Suppose the market demand increases to $$QD = 12,000 - 40P$$ while the cost function remains $$TC = 2,000 + 20q + 5q^2$. What happens to the long-run equilibrium number of firms?

Accepted Answer

It increases

Question 6

If each firm in the industry produces the same output at long-run equilibrium, what is the equilibrium output per firm given $$TC = 2,000 + 20q + 5q^2$ and total industry output of 1,200 units?

Accepted Answer

20 units

Question 7

If the market price falls below the minimum average cost for the cost function $$TC = 2,000 + 20q + 5q^2$, what will happen in the long run?

Accepted Answer

Firms will exit the market

Question 8

Given $$TC = 2,000 + 20q + 5q^2$, what is the average cost (AC) function?

Accepted Answer

$$AC = \frac{2,000}{q} + 20 + 5q$$

Question 9

If the government imposes a lump-sum tax of $$500 on $$each firm, how does this affect the marginal cost curve for $$TC = 2,000 + 20q + 5q^2$?

Accepted Answer

It does not change

Question 10

If the cost function is $$TC = 2,000 + 20q + 5q^2$ and the market price is P = 70$, what is the profit-maximizing output for a firm?

Accepted Answer

10 units

Question 11

If the market demand is $$QD = 10,000 - 40P$$ and the equilibrium price is $$P = 70$$, what is the total quantity demanded in the market?

Accepted Answer

1,200 units

Question 12

If the cost function is $$TC = 2,000 + 20q + 5q^2$, what is the profit for a firm producing 10 units at a market price of P = 70$?

Accepted Answer

$$\300$

Microeconomics: Long-Run Competitive Equilibrium (Firm and Industry Analysis)

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