Question

In: Economics

If a representative firm with the total cost given by TC = 20 + 20q +...

If a representative firm with the total cost given by TC = 20 + 20q + 5q2 operates in a competitive industry where the short-run market demand and supply curves are given by ??=1,400−40? and ??=−400+20?, the number of firms operating in the short run will be:

a. 140

b. 200

c. 280

d. 100

Solutions

Expert Solution

euqilbruim price and quantity is the market at Qd =Qs.

1400 - 40P = -400 + 20P

1800 = 60P

P = $30

Qd = 1400 - 40*30 = 1400 -1200= 200

Q= 200

we have TC = 20 + 20q + 5q2

Mc = 20 + 10q

now firm choose the output where its maximize its profit at MR =MC. and for compeitive market MR =P

30 = 20 + 10q

10 = 10q . q = 1

the number of firms operating in the short run will be: = Q / q

= 200 /1 = 200

so there are 200 firms operating in the short run.

Rahul Sunny answered 2 years ago
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