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    Firm Profit Maximization

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    I have 3 short Micro problems that I need some help with. Please provide detailed explanations.

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    Hi, see the attached file. thanks.

    Problem Set 7

    ***Explain all your work***

    1) Firm Profit Maximization 1
    Consider the market for textiles in the United States, which we will treat as perfectly competitive. The market demand for textiles is expressed as:
    P = 250 - 0.5Q------------1
    and the supply of textiles is expressed as:
    P = Q/10--------------2
    where P represents price per bolt of cloth and Q represents the number of bolts of cloth produced in the entire industry each day. The typical firm in this market has total cost
    TC = 50 + 5q2--------------3
    where q represents the number of bolts of cloth produced by a single firm each day. Thus, marginal cost is given by:
    MC = 10q.---------------4

    a) Determine the equilibrium market price and quantity in the market for textiles.

    The equilibrium condition is when demand is equal to supply. Equating equation 1 and 2, we get,
    250 -0.5Q = Q/10
    Q=416.67
    P=41.67
    b) At the equilibrium market price computed in (a) above, what is the quantity produced by a typical firm?
    The quantity produced by a typical firm will be when MR=MC
    In perfect competition, MR=P=41.67
    MC=10q=41.67, thus q=4.167

    c) At the equilibrium market price computed in (a) above, what is the profit of a typical firm?
    Profit of a typical firm: TR-TC
    TR=P*q =41.67*4.167=173.62
    TC=50+5*4.167^2=136.82
    Profit = 173.62-136.82=36.8

    d) If all firms in the market have the same cost structure, how many firms would compete at the equilibrium price computed in (a) above?
    Q=The total quantity in the market = 416.67
    q=4.167
    No. of firms = Q/q = 416.67/4.167=100

    e) If all firms in the ...

    Solution Summary

    Firm Profit Maximization is illustrated.

    $2.19