Suppose market QD = 90 – 15P and market QS = 6P – 204 and the...

Suppose market QD = 90 – 15P and market QS = 6P – 204 and the representative firm’s total cost is TC = 4 + 3q + 0.1q2 and its marginal cost is MC = 3 + 0.2q.

a.What is market equilibrium price? Show your work.

b.What is the firm’s profit maximizing level of output at this price? Assume this is a perfectly competitive industry.

c.What is the firm’s profit?

d.If these same market conditions persist, would there likely be entry into this industry, exit from the industry, or no change in the long run? Explain briefly.

Expert Solution

Rahul Sunny answered 8 months ago

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