Question

An imperfectly competitive firm has the following total cost curve: c = 100 4q. what is average total cost equal to when q = 10?

Answer 1

The total cost $= 100 + 4q$

So, Marginal cost $= d/dq (TC) = d/dq (100 + 4q) = 4$

So, marginal cost is constant and its value is 4 for any unit.

So, when$q = 10$, marginal cost $= 4$.

Total cost $= 100 + 4* 10 = 140$

$Average total cost = TC/q = 140/10 = 14$

The average total cost equal to when $q = 10$ is 14.

What is the issue with markets that are  Imperfectly competitive?

• If imperfectly competitive markets acted competitively, the value of economic activity as measured by the total of producer and consumer surplus would be higher.
• In other words, unfair competition causes a misallocation of resources that harms the economy.
• Illustrations of  Imperfectly competitive firm are,
• Both oligopolies and monopolies are Imperfectly competitive firms.
• If a company has a monopoly, it may be able to charge prices that are excessive by conventional standards.
• Government intervention.
• The stock market.

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