Respuesta :
Answer: Level of output is 135 units, equilibrium price is $260 and the profit for each firm is zero.
Explanation:
(a) To determine the equilibrium level of output:
P = MC
Recall that the marginal cost is $260.
P = 260.
P = 800 - 4Q
260 = 800 - 4Q
4Q = 800 - 260
4Q = 540
Q = 540 / 4
Q = 135units
Therefore, the equilibrium level of output is 135units.
b. To determine the equilibrium market price:
P = 800 - 4Q
Recall that Q = 135
P = 800 - 4Q
= 800 - 4(135)
= 800 - 540
= $260.
c. Determine the profits for each firm.
Since the firms have an equilibrium price of $260 and an output of 135, each of the four firms will get a quarter of the market output which is (135 / 4) = 33.75.
Profit for each firm = TR - TC
=(PQ) - (MC × Q) =(260 × 33.75) - (260 × 33.75)
=8775 - 8775
= 0.
Each of the firm makes zero profit.
