Gasoline is sold through local gas stations under perfectly competitive conditions. All gas station owners face...

Gasoline is sold through local gas stations under perfectly competitive

conditions. All gas station owners face the same long-run total cost function given by:

LRTC= 0.01q³-2q²+101q

Where q is the number of gallons sold per day.

Assuming the market is in long-run equilibrium, how much gas will each firm sell per day? What is the value of long- run average cost at this output level? What is the long run equilibrium price?

(b) The market demand for gasoline is given by:

Q_D= 2,500,000 - 500,000P

Where Q_D is the number of gallons demanded per day and P is the price per gallon. Given your answer to part (a), how much gasoline will be demanded and how many gas stations will there be?

(c ) Graphically Show your results.

Expert Solution

Rahul Sunny answered 7 months ago

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