Problem 1. What are the main characteristics of a perfectly competitive market that cause buyers and sellers to be price takers?
Problem 2. A perfectly-competitive firm (a firm that operates in a perfectly competitive market) has the following cost function:
TC = 2000 + 10Q + 0.02Q^2
The market price is $25, so that TR = PQ = 25Q.
a. What is the optimal (profit-maximizing) output level?
b. What is MR at that level?
c. What is MC at that level?
d. What is the profit at that level?
Problem 3. Explain a monopolist's output and price decisions.
Problem 4. A monopoly firm has the following cost function:
TC = 10000 + 100Q + 0.02Q^2
and it faces a market demand function:
Q = 20000 - 100P
a. What is the firm's optimal (profit-max) output?
b. What is the profit-maximizing price that the firm charges?
c. What is the maximum profit?