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:

Kiloliters

A metric unit of volume equivalent to 1,000 liters, often used to measure large quantities of liquid.

Aviation Fuel

A specialized type of petroleum-based fuel used to power aircraft.

Gallons

Gallons are a measure of volume primarily used in the United States, traditionally used for measuring liquids like water, gasoline, and milk.

Pounds

A unit of weight in the British imperial and United States customary systems, equal to 0.453592 kilograms.