Purchase Solution

# understanding perfectly competitive markets algebraically.

Not what you're looking for?

Please see the attached. I need assistance in determine the following:

1. How can I tell what the profit maximizing level of output is?

2. The average cost per unit for producing the output identified in
part A?

3. What is the firm's profit or loss?

4. Is the firm operating in the long run or in the Short run. How would I know this.

How can I make these determinations based off of the attached?

##### Solution Summary

The following outlines the process of algebraically solving for equilibrium and calculating a firms profit or loss.

##### Solution Preview

1. Lawn mowing services are supplied by a host of individuals in the suburb of Westbrook. Demand and supply conditions in the perfectly competitive domestic for lawn mowing services are:
P = \$75 - 1.75QD Demand
P = \$2QS Supply
where P is price per lawn mowed and Q is quantity of lawns mowed per day.

a.) Algebraically determine the equilibrium industry price/output combination.
P = \$75 - 1.75Qd Qd = (-P + 75) / 1.75 Qs = P / 2
Qd = (-P + 75) / 1.75 Qd = (-40 + 75) 1.75 Qs = 40 / 2
Qd = 35 / 1.75 Qs = 20
P = \$2Qs Qd = 20
Qs = P / 2
Equilibrium Price = \$40
Qs = Qd Equilibrium Quantity = 20
P / 2 = (-P +75) / 1.75
1.75P = (-P + 75) / 2
1.75P = (-2P + 150)
2P + 1.75P = 150
3.75P = 150
P = 150 / 3.75
P = \$40

b.) Confirm this by graphing industry demand and supply curves (Using excel). For the graph, use prices: 10, 20, 30, 40, 50, 60, 70, 80, 90 and Quantities: 5, 10, ...

##### Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

##### Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

##### Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.