Consider the costs for the following lobster producing firm in a perfectly compe
ID: 1206730 • Letter: C
Question
Consider the costs for the following lobster producing firm in a perfectly competitive market: TC=80+10q+q^2 & MC=10+2q
a) From the total cost function(TC) derive the average total cost(ATC), average variable cost(AVC) and average fixed costs(AFC) functions.
b) What is the supply function for the firm? Write the supply function as a function of P.
c)Currently there are 500 lobster producers in the market with identical costs. What is the supply function for the market?
d) Using the market supply and demand functions for lobster, find the short run equilibrium price and quantity. How many lobsters did each individual firm sell?
Explanation / Answer
Average total cost = 80/q+q+10 and average variable cost is 80/q+q. Average fixed cost = 10 Supply curve is the rising part of the MC cuve Hence it will be = 2q To find out the eqm price, we need to know the Demand function as well.