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EXAMPLE: ( OLD MIDTERM QUESTION)

EXAMPLE: ( OLD MIDTERM QUESTION) Suppose that the short run cost function of a firm in a competitive industry with many identical firms is given by C(q) =q2+q+9 a) Derive the AC, AVC and MC functions.

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EXAMPLE: ( OLD MIDTERM QUESTION)

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  1. EXAMPLE: ( OLD MIDTERM QUESTION) Suppose that the short run cost function of a firm in a competitive industry with many identical firms is given by C(q) =q2+q+9 a) Derive the AC, AVC and MC functions. b) Draw the graphs of AC, AVC and MC functions on the same coordinate plane. For what level of output is AC minimum? Assume that there are 100 firms in the industry c) Derive the supply of each firm and the total supply function and draw their graphs on the same coordinate plane. The market demand function is QD=52-p d) Derive the (residual) demand that each firm faces? e) What will be the equilibrium price and the equilibrium quantity? Draw the equilibrium graphically.

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