FNR 407, 2006, Exercise 3

1. Given the following equation for a firm selling in a perfectly competitive market:

Total variable cost, TVC = 25 -2Q + 0.2Q²

Fixed cost, FC = $200

Product price, P = $4 per unit

Q = number of units to be produced

a. Write the equation for the total cost (TC) curve

b. Write the equation for the marginal cost (MC)

c. At what point, Q, would you recommend the firm operate?

2. Given the following equations for a firm that is a monopolist:

Total variable cost, TVC = 25 – 2Q + 0.2Q²

Fixed cost, FC = $200

Demand curve is Price (P) = Average Revenue (AR) = $42 – 2Q

a. Write the equation for total revenue

b. At what output, Q, would you recommend the firm operate?

c. What will be the market price?