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Thread: Microeconomics- competitive market and demand

  1. #1
    May 2009

    Post Microeconomics- competitive market and demand


    I am in desperate need of help for some micro questions. This is one of them
    Can anyone help?

    Thanks in advance!

    Consider a competitive market in which the market demand for the product

    expressed as:

    and the supply of the product is expressed as:
    = 25 + 0.50Q.

    Price, P, is in dollars per unit sold, and Q represents rate of production and sales

    hundreds of units per day. The typical firm in this market has a marginal cost of:
    = 2.5 + 10Q.

    a) Determine the equilibrium market price and rate of sales.
    b) Determine the rate of sales of the typical firm, given your answer to
    part a) above.
    If the market demand were to increase to P = 100 - 1.5Q, what would
    the new price and rate of sales in the market be? What would the new
    rate of sales for the typical firm be?
    d) If the original supply and demand represented a long-run equilibrium
    condition in the market, would the new equilibrium c) represent a new
    long-run equilibrium for the typical firm?
    e) An output tax is imposed on ONE firm's output. What will happen to
    the market price? Will the production of this firm stay the same?
    Would the effect have been the same if the tax had been imposed on

    all firms equally?
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  2. #2
    May 2009
    in front of PC, obviously
    are you sure you got the values for demand and supply question correct, because, when you expressed both of them in terms of Q:
    demand Q = 50-(2/3)p

    supply Q = 2p - 50.

    when finding market equilibrium and equate them you would get a price of zero dollar, free product... sth which is quite nonsense in microecon tutorial question
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