Consider a Competitive Industry and a Price-Taking Firm That Produces $Q _ { d } = 10,000 - 10,000 P + 1.0 M$

question 31

Multiple Choice

Consider a competitive industry and a price-taking firm that produces in that industry.The market demand and supply functions are estimated to be: Demand: $Q _ { d } = 10,000 - 10,000 P + 1.0 M$ Supply: $Q _ { s } = 80,000 + 10,000 P - 4,000 P _ { I }$ where Q is quantity,P is the price of the product,M is income,and $P _ { I }$ is the input price.The manager of the perfectly competitive firm uses time-series data to obtain the following forecasted values of M and $P _ { I }$ for 2021: $\hat { M } = \$ 50,000 \text { and } \hat { P } _ { I } = \$ 20$ The manager also estimates the average variable cost function to be $A V C = 3.0 - 0.0027 Q + 0.0000009 Q ^ { 2 }$ Total fixed costs will be $2,000 in 2021.The marginal cost function is:

• A)SMC = 3.0 - 0.0027Q + 0.0000009Q²
• B)SMC = 3.0 - 0.00135Q + 0.00000045Q²
• C)SMC = 3.0Q - 0.0027Q² + 0.0000009Q³
• D)SMC = 3.0 - 0.0054Q + 0.0000018Q²
• E)none of the above

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Definitions:

Quantity Demanded

The total amount of goods or services that consumers are willing to purchase at a given price level at a specific time.

Market Price

The current price at which an asset or service can be bought or sold, determined by supply and demand dynamics in the market.

Equilibrium Price

The market price at which the quantity of a good or service supplied is equal to the quantity demanded, leading to market balance.

Market Price

The amount of money that a product is bought or sold for in the marketplace; determined by supply and demand.