My Math Forum Economics question about total cost and market price etc...

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 November 30th, 2010, 07:37 PM #1 Newbie   Joined: Nov 2010 Posts: 6 Thanks: 0 Economics question about total cost and market price etc... I got stumped by what should be a simple econ question but I cannot figure it out. It goes like this: Suppose the total cost for various levels of output for a competitive firm are given in the table below: (Quantity)(0,1,2,3,4,5,6,7,8,9)**(TotalCost)(10,12 ,15,19,24,30,37,46,55,65) How many units should the firm produce if the market price is $8? Well i know the answer to that is 6 (i think) But what price will this firm charge in the long run? Thoughts? Oh and how you got the answer would be nice cause i tried what i thought was correct.  November 30th, 2010, 08:10 PM #2 Senior Member Joined: Jul 2010 From: St. Augustine, FL., U.S.A.'s oldest city Posts: 12,211 Thanks: 521 Math Focus: Calculus/ODEs Re: Economics question about total cost and market price etc Since profit P equals revenue R less costs C and revenue is price times quantity q sold, we have q.....C.....R.....P 0.....10....0.....-10 1.....12....8.....-4 2.....15....16.....1 3.....19....24.....5 4.....24....32.....8 5.....30....40....10 6.....37....48....11 7.....46....56....10 8.....55....64.....9 9.....65....72.....7 It does appear that an output of 6 units maximizes profit. As for as the long run, it's been way too long since I took Economics!  November 30th, 2010, 08:37 PM #3 Newbie Joined: Nov 2010 Posts: 6 Thanks: 0 Re: Economics question about total cost and market price etc yeah thats exactly what i did ... but what about the long run? November 30th, 2010, 08:56 PM #4 Global Moderator Joined: Nov 2006 From: UTC -5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms Re: Economics question about total cost and market price etc Quote:  Originally Posted by dalearyous yeah thats exactly what i did ... but what about the long run? About$9, the marginal price.

 November 30th, 2010, 10:02 PM #5 Newbie   Joined: Nov 2010 Posts: 6 Thanks: 0 Re: Economics question about total cost and market price etc the hint i got: Think about where the price ends up in a perfectly competitive market in the long run. still no idea
November 30th, 2010, 10:07 PM   #6
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Re: Economics question about total cost and market price etc

Quote:
 Originally Posted by dalearyous Think about where the price ends up in a perfectly competitive market in the long run.
That would be marginal cost, as I mentioned in my last post.

 December 1st, 2010, 06:28 AM #7 Newbie   Joined: Nov 2010 Posts: 6 Thanks: 0 Re: Economics question about total cost and market price etc $9 is not the correct answer though December 1st, 2010, 08:28 AM #8 Global Moderator Joined: Nov 2006 From: UTC -5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms Re: Economics question about total cost and market price etc Quote:  Originally Posted by dalearyous$9 is not the correct answer though
There are different ways of calculating marginal cost (thus my hedge "around"). Find the appropriate one and apply it.

 December 1st, 2010, 09:16 AM #9 Newbie   Joined: Nov 2010 Posts: 6 Thanks: 0 Re: Economics question about total cost and market price etc so i calculated the marginal cost for each change in quantity but a bit confused on where to go after that. q.....C.....R.....P 0.....10....0.....-10 MC 1 1.....12....8.....-4 MC 3 2.....15....16.....1 MC 4 3.....19....24.....5 MC 5 4.....24....32.....8 MC 6 5.....30....40....10 MC 7 6.....37....48....11 MC 9 7.....46....56....10 MC 9 8.....55....64.....9 MC 10 9.....65....72.....7
 December 1st, 2010, 04:03 PM #10 Global Moderator     Joined: Nov 2006 From: UTC -5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms Re: Economics question about total cost and market price etc The marginal cost if the quantity was 2 isn't helpful here because you're selling more than that. You need to find the marginal price for the quantity that's actually being sold (in the lr).

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