Re: Competitive economy with finite firms

Posted by happy on Jun 16, 2017; 8:09am
URL: http://discussion-forum.276.s1.nabble.com/Competitive-economy-with-finite-firms-tp7605697p7605698.html

Ci = 4Qi + 4 (By equating MPK/MPL = r/w) (for each firm)
MCi = 4

Supply curve for firm i : P = 4

AS: P=4 (Because AS is horizontal summation of individual supply curve)

AD: P = 20 - Qd

AS intersect AD at P = 4 and Qd(Aggregate quantity sold) = 16
Because of symmetry in the cost, quantity sold by each firm = 2

Economic Profit of each firm = TR - TC = 8 - (8+4) = -4