A firm sells its product in a perfectly competitive market where other firms charge a price of...
Question:
A firm sells its product in a perfectly competitive market where other firms charge a price of $120 per unit. The firm's total costs are {eq}C(Q) = 50 + 12Q + 2Q^2{/eq}. (A) What price should the firm charge in the short run? (B) How much output should the firm produce in the short run? (C) What are the firm's short-run profits?
Perfect Competition:
Perfect competition is a type of market structure where they are many firms producing a homogeneous product, and there is free entry and exit. Firms in this environment are said to have no power to set price, and instead take the market price as given (price takers). Firms earn zero economic profit in the long run in this market, as ensured by the free entry and exit condition.
Answer and Explanation: 1
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View this answer(A) Firms are price takers, since they will set price = market price = $120 per unit.
(B) In the short run, firms will produce until marginal cost...
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