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economics: equilibrinum price

Given these demand and supply curves,

Q = 70  2P Demand

Q = 10 + P Supply

Solve for equilibrium price and quantity.

The demand curve shifts in to the left by 15 units. Solve for the new equilibrium price and quantity.

 $ MC


 P D = AR = MR

 Q1 Q2 Q3 Quantity

How much output should this perfect competitor produce? At that level of output, is the firm making an economic profit, an economic loss or breaking even?


 Coordinates are (P, Q)
Price first, Quantity second.

A o (10, 5)

B o (6, 8)



Starting at A on the demand curve above, what is the price elasticity of demand in moving from A to B?


Limit price

Monopoly price

Limit price

1.5, 3.0
2.5, 2.0

Monopoly price

1.0, 4.0
1.75, 3.0

(Payoffs are in billions of dollars.)

This is the game from Assignment #3. The industrys best outcome is the bottom left cell, where total profits are 1.0 + 4.0 = 5.0, and the only way to get there is through an agreement.

What do you think the negotiated payoff to each firm would be in such an agreement?


Solution Summary

the problem deals with concepts in economics: equilibrinum prices.