Use the following situation to answer questions 4 through 9: 4. Suppose that the

Question

Use the following situation to answer questions 4 through 9: 4. Suppose that the Incom Starfighter Facility is but one of many producing Starfighters for the different factions found in the Star Wars Universe (thus, making the Starfighter market perfectly competitive). The market demand and supply curves are given by pDemand-500-Q psupply = 50 + Q If the total and marginal cost functions for the Incom facility are given by: MC = 50 + 25Q TC = 50Q + 12.50° + 1012.5 This means that the Incom company will produce each at a price of profits. Starfighters, long-run earning

Explanation / Answer

Q4:

Pd = 500-Q

Ps = 50+Q

MC = 50+25Q

TC = 50Q +12.5Q^2+1012.5

Equilibrium in mArket:

500-Q = 50+Q

450 = 2Q

Q = 450/2

Q = 225

P = 50+225

P = 275

Starfighters supply/produce at P = 275 according to MC function:

275 = 50+25Q

225 = 25Q

Q = 225/25 = 9

At price P = 275, earning Profit = 9*225 –(20*9 +12.5*81 +1012.5)

Profit = -180

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