Question
In: Economics
Consider a perfectly competitive market where all firms have identical long-run marginal costs given by LRMC...
Consider a perfectly competitive market where all firms have
identical long-run marginal costs given by LRMC = 10. Furthermore,
suppose that the market demand curve is given by ? = 3000 −
50?.
a. Determine the long-run equilibrium quantity and price in this
market.
b. Determine the number of firms that operate in this market in the
long-run, assuming that a typical firm produces 25 units of
output.
Solutions
Expert Solution
LRMC= 10
Q = 3000-50P
P= 60 -0.02Q
(a) At the long run equilibrium : P=LRMC =LRATC , here average cost is not given. So , equate P=LRMC , we get :
60- 0.02Q = 10
0.02Q = 50
Q = 2500 (Long run equilibrium quantity)
P= $10 (Long run equilibrium price)
(b) If each firm produces 25 units of output. And the total output = 2500 units.
This implies there are 2500/25 = 100 firms that operate in the market in the long run.
Rahul Sunny answered 2 years agoRelated Solutions
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