FIRM'S SUPPLY AND DEMAND

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FIRM'S SUPPLY AND DEMAND

PREETY BHOGAL
Mkt dd curve Q=1500-50P
long run operating costs are TC=0.5q^2-10q
ss curve for entrepreneurs is Q=0.25w w=wage rate
each firm requires 1 entrepreneurs i.e qty of entrepreneurs hired= no. of firms
long run tc for each firm ; TC=0.5q^2-10q+w

a) find long run euilibrium qty produced. qty prduced by each firm ? equilibrium price ? no of entrepreneurs hired and their wage rate ? no. of firms ?
b) demand shifts outward to Q-2428-50P how will your ans change?
c)entrepreneurs responsible for upward sloping ss curve so they will receive rents generated...calculate the rents in part a and part b. show that these are equal to the value of producer surplus generated.


please answer this query asap...m really confused abt how to solve this....
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Re: FIRM'S SUPPLY AND DEMAND

Vasudha
Hey, for the first part price in the long run equilibrium will be minimum of average cost. So minimize 0.5q-10+w/q wrt q. U get q=root(2w). Min AC comes out to be root(2w)-10. This is the price. From here get quantity demanded in terms of w. Quantity supplied is 0.25w.root(2w). Equate them to get w. U can get the other variables from there. Now see if u can do the other parts.