Competitive markets (L13)

Question 1

market demand/ supply

Answer 1

sum of individual demand/supply

Question 2

what is fixed in the short run

Answer 2

a factor eg capital as well as the number of firms

Question 3

long run

Answer 3

nothing is fixed, there is entry and exit for all firms

Question 4

short run profit max

Answer 4

p=mc

Question 5

how to find market supply

Answer 5

mc=p, so differentiate the cost function
say you get p=4y, rearrange for y
this means each firm produces p/4=y
times this value by number of firms
equate to market demand to find equilibrium

Question 6

short run supply

Answer 6

sub p into the equation you got from finding mc

Question 7

short run quantity

Answer 7

sub p value into market supply

Question 8

profits

Answer 8

p x short run supply-cost function

Question 9

in the long run what changes with profit max

Answer 9

with free entry/exit, profit=0
AC=MC
cost/y= dC/dy

Question 10

long run price

Answer 10

same process as SR, find mc=p and rearrange mc(y)=p

Question 11

long run quantity

Answer 11

same as demand so sub p into demand function

Question 12

how to find the number of firms necessary to produce a particular quantity

Answer 12

use rearranged y formula to sub into ny=long run quantity

Question 13

when do firms exit/not produce

Answer 13

short run- revenues<variable costs (fixed cost sunk)
long runx revenues< costs (negative profit)