Market demand is given as Q_D= 40 - P.Market supply is given as Q_S= 3P.Each identical firm has MC = 5Q and ATC = 3Q.What is a firm's profit

Question

Quizplus · Accepted Answer

To find the quantity supplied by each firm, we need to set market supply equal to the quantity supplied by one firm: 3P = MC = 5Q Q = 3P/5 To find each firm's price, we need to substitute their quantity supplied into the market demand equation: Q_D = 40 - P 40 - P = (3P/5) * 2 40 - P = 6P/5 P = $10 To find each firm's profit, we need to use the price to calculate their total revenue and subtract their total cost: TR = P * Q = $10 * (3P/5) = $6P TC = ATC * Q = 3Q^2 = 27P^2/25 Profit = TR - TC Profit = 6P - 27P^2/25 Profit = 8 Therefore, the answer is B, and a firm's profit is $8.

Market Demand Is Given as QD = 40 - P

Market Demand Is Given as Q_D= 40 - P