1. A firm has a demand function P = 100 - 5Q and a cost function: AC=MC=20 a. What price,...
Question:
1. A firm has a demand function {eq}P = 100 - 5Q {/eq} and a cost function: {eq}AC=MC=20 {/eq}
a. What price, quantity, and profit occur if this a purely competitive market?
b. Determine the optimal price, quantity, and economic profit for the firm if it is a pure monopolist.
c. Determine the quantity and price that maximize revenue for the monopolist.
Profit Maximization:
The strategic planning of firms in the employment of factors and the determination of price and output based on their costs to obtain the greatest profits possible is referred to as profit maximization.
Answer and Explanation: 1
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View this answera. The demand function is given by {eq}P = 100 - 5Q {/eq}
The average cost (AC) and the marginal cost (MC) are equal and are given by
{eq}\begin{...
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Perfect Competition in Economics & Adam Smith's 'Invisible Hand'
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Chapter 7 / Lesson 1
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Perfect competition is perpetuated in regulated economic market systems, as the concept of the 'invisible hand,' devised by Adam Smith, keeps supply and demand lines in check. Learn more about these concepts, the five requirements for a perfectly competitive market, and market equilibrium, seeing applications of each through examples.
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