Suppose That There Are 1,000 Firms in a Perfectly Competitive

question 147

Essay

Suppose that there are 1,000 firms in a perfectly competitive industry, each with a short-run total cost curve given by TC = 800 + 8Q + 0.1Q² and marginal cost curve given by MC = 8 + 0.2Q.
a. What is the profit-maximizing output level for each firm at a market price of $20?
b. How much profit does each firm make at a market price of $20?
c. Explain whether the industry will expand or contract in the long run.

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Definitions:

Minimum Legal Capital

The least amount of capital that a company is required to maintain by law, intended to protect creditors by ensuring the company has enough assets to meet its obligations.

Stockholders

Individuals or entities that own shares in a corporation, giving them ownership interests and possibly rights to dividends, voting, and information.

Corporation's Actions

Decisions or movements made by a corporation, such as dividend distributions, stock splits, or acquisitions, affecting its operations and stakeholders.

Shares Outstanding

The total number of a company's shares of stock that are owned by shareholders, including those held by institutional investors and restricted shares.