Use the following situation to answer questions 4 through 9: 4. Suppose that the
ID: 1114939 • Letter: U
Question
Use the following situation to answer questions 4 through 9: 4. Suppose that the Incom Starfighter Facility is but one of many producing Starfighters for the different factions found in the Star Wars Universe (thus, making the Starfighter market perfectly competitive). The market demand and supply curves are given by: PDemand = 500-Q Psupply = 50 + Q If the total and marginal cost functions for the Incom facility are given by: MC = 50 + 25Q TC = 500 + 12.50° + 1012.5 This means that the Incom company will produce each at a price of profits. Starfighters long-run earningExplanation / Answer
4) MArket demand = P = 500-Q
MR = 500 - 2Q
MC = 50+25Q
profit maximizing output is MR = MC
500 -2Q = 50+25Q
27Q = 450
Q = 17
P = 500 - 17 = $483
profits = TR - TC
profits = 8211 - ( 50(17) +12.5(17)2 -1012.5
profits = 2736
4) market consumer surplus = 1/2 * (500-483) *17 = $144.5
producer surplus = 1/2 ( 483 - 50) *17 = $3680.5