How much output should the firm produce in the short-run

1. For each of the following market structure characteristics, insert the correct Market Type(s). There may be more than one. Use these abbreviations:  PC - perfect competition; MC - monopolistic competition; and M - monopoly.

Market Structure Characteristic

Market Type

Advertising is not effective for the individual firm.




The seller is a price-taker.


Neither an individual buyer nor seller can affect the market demand and supply curves.


Long-run economic profits are possible.


In long run equilibrium, each supplier produces where SRATC and LRATC are at a minimum.


Advertising is used extensively.


In equilibrium, P = MR = MC.


Profits are maximized at the output where MR = MC




Product is unique.


In equilibrium, products cannot be produced at a lower cost or sold at lower price.


Economies of scale are often a barrier to entry.


Products have many close substitutes.


2. A firm sells its product in a perfectly competitive market where other firms charge a price of $80 per unit. The firm's costs are C(Q) = 40 + 8Q + 2Q2. Show your computations.

a. How much output should the firm produce in the short-run?

b. What price should the firm charge in the short-run?

c. What are the firm's short-run profits?

d. What adjustments should be anticipated in the long-run?

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Microeconomics: How much output should the firm produce in the short-run
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