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characteristics of a perfectly competitive market

1. What are the main characteristics of a perfectly competitive market that cause buyers and sellers to be price takers?

2. A perfectly-competitive firm (a firm that operates in a perfectly competitive market) has the following cost function:

TC = 2000 + 10Q + 0.02Q^2

The market price is $25, so that TR = PQ = 25Q.

What is the optimal (profit-maximizing) output level?
What is MR at that level?
What is MC at that level?
What is the profit at that level?

3. Explain a monopolist's output and price decisions.

4. A monopoly firm has the following cost function:

TC = 10000 + 100Q + 0.02Q^2

and it faces a market demand function:

Q = 20000 - 100P

What is the firm's optimal (profit-max) output?
What is the profit-maximizing price that the firm charges?
What is the maximum profit?

Please refer to attached word document.
thanks

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Solution Summary

A monopolist's output and price decisions are explicated.

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