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    Finding optimum price and output levels

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    Given the following equations:

    Qd=-1000P+Income+11000
    TC=(1/70)q^2-(25/35)q+100
    MC=(1/35)q-(25/35)
    Number of firms =85

    Assume Income =11000.
    i.What is the market supply equation?
    ii.What is the market equilibrium price ?
    iii.What is the market equilibrium quantity?
    iv.What is the profit maximizing output (PMO) level?
    v.What is the average profit and total profit at this PMO level?

    © BrainMass Inc. brainmass.com October 10, 2019, 1:16 am ad1c9bdddf
    https://brainmass.com/economics/general-equilibrium/finding-optimum-price-output-levels-327826

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    Solution:

    1. What is the market supply equation?

    A perfectly competitive firm sets its output such that MC=P
    P=MC =(1/35)*q-(25/35)
    P=(1/35)*q-(25/35)
    35P=q-25
    q=35P+25

    There are 85 similar firms in the market. So, Market supply will be given by
    Qs=85q=85*(35P+25)=2975P+2125
    Qs=2975P+2125

    2. What ...

    Solution Summary

    The solution describes the steps to find out equilibrium price , equilibrium quantity, profit maximizing output level, average and total profit at PMO level in case of perfectly competitive market.

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