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Anyone here good with economics?

if ...

the industry demand curve is Q=1800-200P
the inverse is P=9-0.005Q
Long run Avg. Cost is $1.5 for all levels of output

how do i calculate the market output, price, consumer surplus, and producer surplus both for perfect competition and monopoly?

Re: Anyone here good with economics?

quote:

Originally posted by S-a-M-u-E-l if ... the industry demand curve is Q=1800-200P the inverse is P=9-0.005Q Long run Avg. Cost is $1.5 for all levels of output how do i calculate the market output, price, consumer surplus, and producer surplus both for perfect competition and monopoly?

That must be a class I've yet to take. What class is this? I'm only in my first year anyways.

Stocks, I can talk all day about.

this is intermediate microeconomics, its getting pretty rough. For some reason I'm not getting this problem

more cowbell!

ask your local crack dealer.

Re: Anyone here good with economics?

quote:

Originally posted by S-a-M-u-E-l if ... the industry demand curve is Q=1800-200P the inverse is P=9-0.005Q Long run Avg. Cost is $1.5 for all levels of output how do i calculate the market output, price, consumer surplus, and producer surplus both for perfect competition and monopoly?

you need to get like variables and work from there.

P = (1800 - Q)/200

then you plug in the other equation to solve for Q.

to solve for price, plug Q into the inverse P equation.

That is the monopoly price. perfect competition price is $1.5 because in that market firms are free to enter and leave and only make normal profits.

that doesnt work, because they are inverses...they are essentially the same things

lol we should make a economics thread...

wholy crap

and i thought d/s/prod. graphs were hard

*not looking forward to 2nd year microeco*

Re: Re: Anyone here good with economics?

quote:

Originally posted by chadmk3 you need to get like variables and work from there. P = (1800 - Q)/200 then you plug in the other equation to solve for Q. to solve for price, plug Q into the inverse P equation. That is the monopoly price. perfect competition price is $1.5 because in that market firms are free to enter and leave and only make normal profits.

lol.

quote:

Originally posted by S-a-M-u-E-l that doesnt work, because they are inverses...they are essentially the same things

plug P into the original equation

Re: Re: Re: Anyone here good with economics?

quote:

Originally posted by Jocker lol.

whats funny jocker ? dont see you solving much ?

Re: Re: Re: Re: Anyone here good with economics?

quote:

Originally posted by chadmk3 whats funny jocker ? dont see you solving much ?

for competition:

Average Costs = Cost function (C(Q)) divided by output:
AC = 1.5 = C(Q)/Q => cost function is C(Q) = AC*Q = 1.5*Q

since our fixed costs are 0 (average cost is just a constant), our price does not depend on our output level, and each competitor would like to produce as much as they can. therefore, each producer will just cover their marginal costs, and set the price to be just a little bit higher than that:

P > Marginal costs > C'(Q) > $1.5
Q < 1800 - 200*1.5 < 1500

price should be any number more than 1.5 ( in reality will be getting very close to 1.5) and market output Q < 1500

for monopoly:

for max profits, marginal profit (marginal revenue - marginal costs) = 0:

revenue= Q*P(Q). P(Q) = 9 - 0.005*Q => revenue = 9Q - 0.005*Q^2.
marginal revenue = derivative of revenue = 9 - 0.01*Q
marginal costs are C'(Q) = (1.5Q)' = 1.5

so, marginal profit is = 9-0.01*Q -1.5. Setting that to 0, we get

7.5 - 0.01*Q = 0 => Q = 750
P = 9 -0.005*Q = 5.25

So our market output Q = 750 and price = 5.25

wow thanks dude..for PC wouldnt the price just be 1.5 because the MC is equal to 1.5, and the price is equal to MC, making price=1.5? (since long run average cost is horizontal, making MC the same line as LAC)

quote:

Originally posted by S-a-M-u-E-l wow thanks dude..for PC wouldnt the price just be 1.5 because the MC is equal to 1.5, and the price is equal to MC, making price=1.5? (since long run average cost is horizontal, making MC the same line as LAC)

the thing is that from economical standpoint it would not make sense. the price would approach the costs (some theorist want to believe it would infinitely approach the costs), but would never become equal. if price equaled costs, no company would ever be making any money and that market segment would just collapse.

the idea behind the perfect competition is that each competitor is fully aware of all the economic laws, meaning that no one would would attempt to produce more than they should (so the output would never quite be the 1500 we have mentioned) - otherwise ALL the competitors are instantaneously going broke and exiting the market.

ah but in the long run in perfect comepetition, firms are making zero profits...

quote:

Originally posted by S-a-M-u-E-l ah but in the long run in perfect comepetition, firms are making zero profits...

eh, then it should be equal to 1.5

those goddamn theorists, never making any sense

Michael Porter FTW - he has FIVE FORCES



I'm such a nerd

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