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Virty [35]
3 years ago
12

Suppose there are 1.000 identical firms producing diamonds. Let the total cost function for each firm be given by C(q, w) = q2 +

wq, where q is the firm's output level and w Ls the wage rate of diamond cutters. If w = 10, what will be the firm's (short-run) supply curve? What is the industry's supply curve? How many diamonds will be produced at a price of $20 each? How many more diamonds would be produced at a price of $21? Suppose the wage of diamond cutters depend on the total quantity of diamonds produced. and suppose the form of this relationship is given by w = 0.002Q where Q represents total industry output, which is 1,000 times the output of the typical firm. In this situation, show that the firm's marginal cost (and short-run supply) curve depend on Q. What is the industry supply curve (in the long-run)? How much will be produced at a price of $20? How much more will be produced at a price of $21? What do you conclude about he shape of the short-run supply curve?
Business
1 answer:
alexandr402 [8]3 years ago
8 0

Answer:

For the price of $20 = $3,333.33

For the price of $21 = $3,500

Kindly go through the explanation for the other answers required.

Explanation:

(a)

C = q2 +wq = q2 + 10q

Firm's short run supply curve is its marginal cost (MC) schedule.

MC = dC / dq = 2q + 10

So, supply curve is: p = 2q + 10

Or,

q = (p - 10) / 2 = 0.5p - 5

Total industry supply, Q = 1,000 x q = 500p - 5,000

p = (Q + 5,000) / 500 [Industry supply curve]

When p = 20, Q = 500 x 20 - 5,000 = 5,000 [Number of diamonds supplied]

When p = 21, Q = 500 x 21 - 5,000 = 5,500

So, when P = 21, 500 more diamonds will be supplied.

(b)

(i)

If w = 0.002Q then

w = 0.002 x (1000q) [Since Q = 1000q]

w = 2q

C = q2 +wq = q2 + (2q)q = 3q2

So, MC = dC / dq = 6q

MC = 6 x (Q / 1000)

So, MC depends on Q.

(ii)

Long run supply schedule is when price = MC

p = 6q = 6 x (Q / 1000)

p = 3Q / 500 [Long run industry supply schedule]

(iii) When p = 20, Q = p x (500/3) = 20 x 500 / 3 = 3,333.33

(iv) When p = 21, Q = p x (500 / 3) = 21 x 500 / 3 = 3,500

(v) Short run supply curve is the positive part of MC.

p = 6q

Therefore, the SR supply curve is a straight line from origin, sloping upwards.

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Answer:

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Instructions: You may select more than one answer. Click the box with a check mark for correct answers and click to empty the bo
grigory [225]

Answer:

The correct options are as follows

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Explanation:

As the question is not complete, the complete question is found online and is attached herewith.

The options given are as follows

Sellers will pay all of the tax.

Buyers will pay all of the tax.

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The quantity of Humbugs demanded will not change.

Now option 1 is not correct as the buyer has to pay the tax not the seller.

option 2 is correct

option 3 is correct

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This is a stable Cashflow and so is an Annuity and because it is done on the first day of the month it is an Annuity due.

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Answer:

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