Below are the cost and demand curves for 2 firms: (20) What KIND of firm is firm

Question

Below are the cost and demand curves for 2 firms: (20) What KIND of firm is firm A? (21) If the price is $ 150, firm A should produce Q = to maximize profits. (22) If firm A produces the output in question 21 they will earn profits equal to:$ (23) Is firm A likely to be able to continue making these profits in the LONG RUN? (24) What is the maximum technical efficiency output level for firm (a)? Q = (25) At which output level does firm (a) have the lowest average fixed cost? Q = (26) What KIND of firm is firm (B)? (27) What is the profit maximizing output level for firm (B)? Q = (28) What price should firm (B) charge to sell the profit maximizing output? P = $ (29) How much profit can firm (B) make if they sell the Q from question 27 at the Price from question

Explanation / Answer

1) Perfectly competitive market

2) at P=150, firm will produce 150. as in a perfectly competitive market profit maximization equation is P=MC.

3) Profit: TR-TC = (150*150) - (50*150) = 15000

4) NO, as ATC is increasing in the long run.

5) Q=100 as ATC is minimum,

6) AT Q=100

7) Firm B is monopoly or monopolistic competition

8) q=50 as MR=MC

9) Should sell at price $12 to maximize profit.

10) Profit = TR-TC = (50*12) - (2*50) = 500

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