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    Market Equilibrium and Profit Maximization under Perfect Competition

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    Market Equilibrium and Profit Maximization under Perfect Competition
    The supply and demand equations for a hypothetical perfectly competitive market are given by
    QS = -100 + 3P and QD = 500 - 2P.
    a) Find the market equilibrium price algebraically.
    b) In Excel, use the above equilibrium price and the cost data from the following table to determine the
    firm's optimal output and its profit or loss.
    c) For each of the following changes in market conditions, find the new market equilibrium and assess
    the impact on the firm's output and profit. Determine whether the firm should operate or
    shut down in the short run. Plot the solutions. (Treat each change-scenario independently.)
    i) To each firm, government provides $40 subsidy per unit of output produced.
    ii) The firm's AVC rises by $20 at each level of output due to an increase in material costs.
    iii) Market demand increases, changing the original demand equation to: QD = 600 - 2P.

    Total Total
    Total fixed variable
    Output cost cost
    0 $100 $ 0
    1 100 100
    2 100 180
    3 100 240
    4 100 320
    5 100 440
    6 100 600
    7 100 800
    8 100 1040
    9 100 1340
    10 100 1800

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    https://brainmass.com/economics/supply-and-demand/market-equilibrium-profit-maximization-under-perfect-228134

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