A perfectly competitive firm has the following (short-run) total cost function: ??(?)=?2+200 and the market demand...

A perfectly competitive firm has the following (short-run) total cost function: ??(?)=?²+200

and the market demand for the firm’s output is given by ??(?)=300−6?.

What is the equilibrium price and how much output will be produced by each firm in the long run?

Suppose that the market demand curve now becomes ??(?)=150−6?

. In the long run, with this reduced demand, what will be the equilibrium market price and quantity and how many firms will be serving the market and graph the long-run market adjustment process.?

(In the long run, there is free entry into this market by firms with the same cost structure. (Again, for simplicity, assume all firms’ cost curves are the same in short run and long run)

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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