Perfect Competition Exercises
This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA
Overview
Download & View Perfect Competition Exercises as PDF for free.
More details
- Words: 1,244
- Pages: 9
3 Pat Pizza
P(i)
P(ii) 14
Output
T cost 0 1 2 3 4 5
Output
TR (i) 10 21 30 41 54 69
T cost 0 1 2 3 4 5
0 14 28 42 56 70 MC
10 21 30 41 54 69
ATC 11 9 11 13 15
12 Profit
TR (i) -10 -7 -2 1 2 1
AVC 0 #DIV/0! 21.0 11.0 15.0 10.0 13.7 10.3 13.5 11.0 13.8 11.8
Profit 0 12 24 36 48 60
MR=
-10 -9 -6 -5 -6 -9 14
Shutdown point is minimum point on the AVC curve. This happens at P 10 Supply curve starts from above the price of 10 (the MC) curve Long-run: MC=LAC =13
4 TC MC ATC AVC 0 14 0 0 1 38 24 38.0 24.0 2 48 10 24.0 17.0 3 62 14 20.7 16.0 4 80 18 20.0 16.5 5 102 22 20.4 17.6 6 128 26 21.3 19.0 * Firms with identical cost structure will enter the industry at
MR:
24
MR=
12
MR = MR =
20 24
Q
any price above the lowest ATC po
5 P
Demand Q 3.65 500,000.00 4.4 475,000.00 5.2 450,000.00 6 425,000.00 6.8 400,000.00 7.6 375,000.00 8.4 350,000.00 9.2 325,000.00 10 300,000.00 10.8 275,000.00 11.6 250,000.00 11.4 225,000.00
Supply output MC AVC ATC 150 6 8.8 15.47 200 4.6 7.8 11.8 250 7 7 11 300 7.65 7.1 10.43 350 8.4 7.2 10.06 400 10 7.5 10 450 12.4 8 10.22 500 20.7 9 11
- if each of the 1000 firms, has identical cost structure, firm's output by 1000. - we will then have the MC at every level of market out - since MC is a representation of Supply curve - above t equilibrium occurs when Qs=Qd. this happen at the pri output is 350,000.00 units. (divide by 1000 you get per - each firm make economic loss equal = (P-ATC)*Q = (5 - definitely, firms exit this industry.
13.2 14
200,000.00 175,000.00
Economic loss
-581
Firms remaining
750
6
- if each of the 1000 firms, has identical cost structure, firm's output by 1000. - we will then have the MC at every level of market out - since MC is a representation of Supply curve - above t equilibrium occurs when Qs=Qd. this happen at the pri output is 350,000.00 units. (divide by 1000 you get per - each firm make economic loss equal = (P-ATC)*Q = (5 - definitely, firms exit this industry. - The minimum insentive for firms to stay in the industr Since P = MC, this exactly happen when each firm prod P=10. - On the demand side, at P = 10, market demand is 30 - Dividing total Quantity demand by each firm's output, firms remaining.
980 P
Demand Q 3.65 500,000.00 4.4 475,000.00 5.2 450,000.00 6 425,000.00 6.8 400,000.00 7.6 375,000.00 8.4 350,000.00 9.2 325,000.00 10 300,000.00 10.8 275,000.00 11.6 250,000.00 11.4 225,000.00 13.2 200,000.00 14 175,000.00
Economic loss Firms remaining
Supply output MC AVC Old ATC New 150 6 8.8 15.47 200 4.6 7.8 11.8 250 7 7 11 300 7.65 7.1 10.43 350 8.4 7.2 10.06 400 10 7.5 10 450 12.4 8 10.22 500 20.7 9 11
-1561 444
- Everything stay the same in the short run. Output is - Due to the increased fixed cost, new ATC at this level make economic loss equal = (P-ATC)*Q = (1561). - definitely, firms exit this industry. - The minimum insentive for firms to stay in the indust Since P = MC, this exactly happen when each firm prod P=12,40. - On the demand side, at P = 12,40, market demand i units. - Dividing total Quantity demand by each firm's output 444 firms remaining.
7 Demand New P D 2.95 4.13 5.3 6.48 7.65 8.83 10
500,000.00 450,000.00 400,000.00 350,000.00 300,000.00 250,000.00 200,000.00
ATC 22.00 16.70 14.92 13.70 12.86 12.45 12.40 12.96
Supply output MC AVC ATC 150 6 8.8 15.47 200 4.6 7.8 11.8 250 7 7 11 300 7.65 7.1 10.43 350 8.4 7.2 10.06 400 10 7.5 10 450 12.4 8 10.22
11.18
150,000.00
500
20.7
9
11
- now total output is 300,000 units at price 7,65 - economic loss (834) - in the long run, The minimum insentive for firms to st when P>= ATC. Since P = MC, this exactly happen whe units, and P=10. - On the demand side, at P = 10, market demand is 20 - Dividing total Quantity demand by each firm's output, firms remaining. Economic loss
-834
Firms remaining
500
8 You shouldn't need the solution for this… work it out yourself.
P(iii) 10 TR (i) Profit 0 -10 10 -11 20 -10 30 -11 40 -14 50 -19 12
25.0
AVC
MC
ATC
23.0 21.0 19.0 17.0
10
15.0 13.0 11.0 9.0
The short-run shutdown point (at price 10)- Also the point at which the supply curve emerges
7.0 5.0 0
0.5
1
1.5
2
2.5
3
3.5
4
40.0
20
35.0
12
30.0
Profit
25.0
-14
MC AVC ATC
20.0 15.0
Shutdown point. 0 18
10.0 5.0 0.0
AVC
6
ATC
20 18 16 14 12 10 8 6 4 2 0
,000
ery level of market output. Supply curve - above the AVC, then market . this happen at the price 8,4, and industry de by 1000 you get per firm). equal = (P-ATC)*Q = (581). ry.
Supply
5
,000
dentical cost structure, then we multiply each
Demand
22
4
,000
150,000.00 200,000.00 250,000.00 300,000.00 350,000.00 400,000.00 450,000.00 500,000.00
1000
3
,000
Firms
2
,000
Total output
1
,000
bove the lowest ATC point - which is in this case: 20
8
dentical cost structure, then we multiply each
6
ery level of market output. Supply curve - above the AVC, then market . this happen at the price 8,4, and industry de by 1000 you get per firm). equal = (P-ATC)*Q = (581). ry. ms to stay in the industry is when P>= ATC. en when each firm produce 400 units, and
4 2
300,000
350,000
300,000
350,000
250,000
200,000
150,000
100,000
0
0, market demand is 300,000.00 units. d by each firm's output, we end up having 750
Total output
Firms
1000
Demand
24
Supply
AVC
ATC
22
150,000.00 200,000.00 250,000.00 300,000.00 350,000.00 400,000.00 450,000.00 500,000.00
20 18 16 14 12 10 8 6
he short run. Output is 350 units a firm. t, new ATC at this level is 12,86.each firm ATC)*Q = (1561). try. ms to stay in the industry is when P>= ATC. en when each firm produce 450 units, and
4 2
250,000
200,000
2,40, market demand is approx. 200,000.00
150,000
100,000
0
d by each firm's output, we end up having
Total output 150,000.00 200,000.00 250,000.00 300,000.00 350,000.00 400,000.00 450,000.00
Firms
1000
22 20 18 16 14 12 10 8 6
Demand
Supply
AVC
ATC
14 12 10 8
nits at price 7,65
6
insentive for firms to stay in the industry is his exactly happen when each firm produce 400
4
0, market demand is 200,000.00 units. d by each firm's output, we end up having 500
0
350,000
300,000
250,000
200,000
150,000
2
100,000
500,000.00
shutdown point (at price 10)- Also which the supply curve emerges
3
3.5
4
4.5
MC AVC ATC
5
6
,000
,000
,000
,000
,000
,000
TC
TC
300,000
350,000
400,000
450,000
500,000
550,000
300,000
350,000
400,000
450,000
500,000
550,000
TC
550,000
500,000
450,000
400,000
350,000
300,000
P(i)
P(ii) 14
Output
T cost 0 1 2 3 4 5
Output
TR (i) 10 21 30 41 54 69
T cost 0 1 2 3 4 5
0 14 28 42 56 70 MC
10 21 30 41 54 69
ATC 11 9 11 13 15
12 Profit
TR (i) -10 -7 -2 1 2 1
AVC 0 #DIV/0! 21.0 11.0 15.0 10.0 13.7 10.3 13.5 11.0 13.8 11.8
Profit 0 12 24 36 48 60
MR=
-10 -9 -6 -5 -6 -9 14
Shutdown point is minimum point on the AVC curve. This happens at P 10 Supply curve starts from above the price of 10 (the MC) curve Long-run: MC=LAC =13
4 TC MC ATC AVC 0 14 0 0 1 38 24 38.0 24.0 2 48 10 24.0 17.0 3 62 14 20.7 16.0 4 80 18 20.0 16.5 5 102 22 20.4 17.6 6 128 26 21.3 19.0 * Firms with identical cost structure will enter the industry at
MR:
24
MR=
12
MR = MR =
20 24
Q
any price above the lowest ATC po
5 P
Demand Q 3.65 500,000.00 4.4 475,000.00 5.2 450,000.00 6 425,000.00 6.8 400,000.00 7.6 375,000.00 8.4 350,000.00 9.2 325,000.00 10 300,000.00 10.8 275,000.00 11.6 250,000.00 11.4 225,000.00
Supply output MC AVC ATC 150 6 8.8 15.47 200 4.6 7.8 11.8 250 7 7 11 300 7.65 7.1 10.43 350 8.4 7.2 10.06 400 10 7.5 10 450 12.4 8 10.22 500 20.7 9 11
- if each of the 1000 firms, has identical cost structure, firm's output by 1000. - we will then have the MC at every level of market out - since MC is a representation of Supply curve - above t equilibrium occurs when Qs=Qd. this happen at the pri output is 350,000.00 units. (divide by 1000 you get per - each firm make economic loss equal = (P-ATC)*Q = (5 - definitely, firms exit this industry.
13.2 14
200,000.00 175,000.00
Economic loss
-581
Firms remaining
750
6
- if each of the 1000 firms, has identical cost structure, firm's output by 1000. - we will then have the MC at every level of market out - since MC is a representation of Supply curve - above t equilibrium occurs when Qs=Qd. this happen at the pri output is 350,000.00 units. (divide by 1000 you get per - each firm make economic loss equal = (P-ATC)*Q = (5 - definitely, firms exit this industry. - The minimum insentive for firms to stay in the industr Since P = MC, this exactly happen when each firm prod P=10. - On the demand side, at P = 10, market demand is 30 - Dividing total Quantity demand by each firm's output, firms remaining.
980 P
Demand Q 3.65 500,000.00 4.4 475,000.00 5.2 450,000.00 6 425,000.00 6.8 400,000.00 7.6 375,000.00 8.4 350,000.00 9.2 325,000.00 10 300,000.00 10.8 275,000.00 11.6 250,000.00 11.4 225,000.00 13.2 200,000.00 14 175,000.00
Economic loss Firms remaining
Supply output MC AVC Old ATC New 150 6 8.8 15.47 200 4.6 7.8 11.8 250 7 7 11 300 7.65 7.1 10.43 350 8.4 7.2 10.06 400 10 7.5 10 450 12.4 8 10.22 500 20.7 9 11
-1561 444
- Everything stay the same in the short run. Output is - Due to the increased fixed cost, new ATC at this level make economic loss equal = (P-ATC)*Q = (1561). - definitely, firms exit this industry. - The minimum insentive for firms to stay in the indust Since P = MC, this exactly happen when each firm prod P=12,40. - On the demand side, at P = 12,40, market demand i units. - Dividing total Quantity demand by each firm's output 444 firms remaining.
7 Demand New P D 2.95 4.13 5.3 6.48 7.65 8.83 10
500,000.00 450,000.00 400,000.00 350,000.00 300,000.00 250,000.00 200,000.00
ATC 22.00 16.70 14.92 13.70 12.86 12.45 12.40 12.96
Supply output MC AVC ATC 150 6 8.8 15.47 200 4.6 7.8 11.8 250 7 7 11 300 7.65 7.1 10.43 350 8.4 7.2 10.06 400 10 7.5 10 450 12.4 8 10.22
11.18
150,000.00
500
20.7
9
11
- now total output is 300,000 units at price 7,65 - economic loss (834) - in the long run, The minimum insentive for firms to st when P>= ATC. Since P = MC, this exactly happen whe units, and P=10. - On the demand side, at P = 10, market demand is 20 - Dividing total Quantity demand by each firm's output, firms remaining. Economic loss
-834
Firms remaining
500
8 You shouldn't need the solution for this… work it out yourself.
P(iii) 10 TR (i) Profit 0 -10 10 -11 20 -10 30 -11 40 -14 50 -19 12
25.0
AVC
MC
ATC
23.0 21.0 19.0 17.0
10
15.0 13.0 11.0 9.0
The short-run shutdown point (at price 10)- Also the point at which the supply curve emerges
7.0 5.0 0
0.5
1
1.5
2
2.5
3
3.5
4
40.0
20
35.0
12
30.0
Profit
25.0
-14
MC AVC ATC
20.0 15.0
Shutdown point. 0 18
10.0 5.0 0.0
AVC
6
ATC
20 18 16 14 12 10 8 6 4 2 0
,000
ery level of market output. Supply curve - above the AVC, then market . this happen at the price 8,4, and industry de by 1000 you get per firm). equal = (P-ATC)*Q = (581). ry.
Supply
5
,000
dentical cost structure, then we multiply each
Demand
22
4
,000
150,000.00 200,000.00 250,000.00 300,000.00 350,000.00 400,000.00 450,000.00 500,000.00
1000
3
,000
Firms
2
,000
Total output
1
,000
bove the lowest ATC point - which is in this case: 20
8
dentical cost structure, then we multiply each
6
ery level of market output. Supply curve - above the AVC, then market . this happen at the price 8,4, and industry de by 1000 you get per firm). equal = (P-ATC)*Q = (581). ry. ms to stay in the industry is when P>= ATC. en when each firm produce 400 units, and
4 2
300,000
350,000
300,000
350,000
250,000
200,000
150,000
100,000
0
0, market demand is 300,000.00 units. d by each firm's output, we end up having 750
Total output
Firms
1000
Demand
24
Supply
AVC
ATC
22
150,000.00 200,000.00 250,000.00 300,000.00 350,000.00 400,000.00 450,000.00 500,000.00
20 18 16 14 12 10 8 6
he short run. Output is 350 units a firm. t, new ATC at this level is 12,86.each firm ATC)*Q = (1561). try. ms to stay in the industry is when P>= ATC. en when each firm produce 450 units, and
4 2
250,000
200,000
2,40, market demand is approx. 200,000.00
150,000
100,000
0
d by each firm's output, we end up having
Total output 150,000.00 200,000.00 250,000.00 300,000.00 350,000.00 400,000.00 450,000.00
Firms
1000
22 20 18 16 14 12 10 8 6
Demand
Supply
AVC
ATC
14 12 10 8
nits at price 7,65
6
insentive for firms to stay in the industry is his exactly happen when each firm produce 400
4
0, market demand is 200,000.00 units. d by each firm's output, we end up having 500
0
350,000
300,000
250,000
200,000
150,000
2
100,000
500,000.00
shutdown point (at price 10)- Also which the supply curve emerges
3
3.5
4
4.5
MC AVC ATC
5
6
,000
,000
,000
,000
,000
,000
TC
TC
300,000
350,000
400,000
450,000
500,000
550,000
300,000
350,000
400,000
450,000
500,000
550,000
TC
550,000
500,000
450,000
400,000
350,000
300,000
Related Documents
Perfect Competition Exercises
June 2020 11
Perfect Competition
November 2019 20
Perfect Competition
July 2020 29
Perfect Competition
June 2020 13
2.1. Perfect Competition
November 2019 19