Question

Suppose a representative firm in a perfectly competitive
industry has the following total cost of

production in the short run: TC = Q^{3} - 60Q^{2} +
3000Q.

a) What will be the long run equilibrium quantity for the firm?
What will be the long run

equilibrium price in this industry?

b) If the industry demand is given by Q_{D} = 12400 -
4P. how many firms will be active in the long-

run equilibrium?

c) Suppose the firm faces a positive demand shock that increases
the industry demand to

Q_{D} = 15000 - 4P. What will be the new equilibrium number
of firms in the market assuming that

the industry is a constant cost industry?

Answer #1

2. Suppose a representative firm producing in a perfectly
competitive industry has the following cost function: C(q) = q2 +
8q + 36 a. Solve for the firm’s average cost function. b. At what
level of q is average cost minimized (i.e. what is the minimum
efficient scale for the firm)? What is the value of average cost at
this level of q? c. Suppose all firms in this industry are
identical and the demand function for this industry is...

Suppose a representative firm producing in a perfectly
competitive industry has the
following cost function:
C(q) = q2 + 8q + 36
a. Solve for the firm’s average cost function.
b. At what level of q is average cost minimized (i.e. what is the
minimum efficient scale for the
firm)? What is the value of average cost at this level of q?
c. Suppose all firms in this industry are identical and the demand
function for this industry is as...

Suppose a representative perfectly competitive firm has the
following cost function: TC = 100 + 5Q2. The short-run
market demand and supply are given by: QD = 600 - 40P
and QS = 20P. How many firms are in the market in the
short-run?

Suppose that the perfectly competitive for market for milk is
made up of identical firms with long-run total cost functions given
by:
TC = 4 q3 - 24 q2 + 40 q
Where, q = litres of milk. Assume that these cost functions are
independent of the number of firms in the market and that firms may
enter or exist the market freely.
If the market demand is :
Qd = 8,000 - 160 P
1. What is the long-run...

A firm operates in perfectly competitive markets with the
following demand and cost functions:
TC=0.5Q2+100Q+50 Q=1000-4P
a) What is the long-run equilibrium
price and quantity in the
market?
b) How many firms are there in the industry in the long-run?

Hot air balloons are made in Nairobi by a number of perfectly
competitive identically – sized firms, each with the following
total cost function, TC = 4q2 + 100q + 100. Market
demand for hot air balloons is given by QD = 1000 – P,
where QD represents total quantity demanded and P is the
price per balloon.
What is the long run equilibrium price in this industry?
What is the equilibrium number of firms?
If this is a constant...

The total cost function for each firm in a perfectly competitive
industry is TC(y)=100+8y^2 . Market demand is q=2000-(market price)
.
Find: the long run equilibrium firm quantity (y), market
quantity (q), amount of firms, and price.

Problem 7 Suppose that in the perfectly competitive baseball cap
industry, each firm has the same cost structure such that long-run
average cost is minimized at 210 caps per day. The firms’ minimum
long-run average cost is $1.50. Total market demand is QD = 4000 −
100P .
(i) (2 points) What is the long-run equilibrium market price and
quantity in this market?
(ii) (2 points) How many firms are in this market?

A perfectly competitive industry consists of many identical
firms, each with a long-run total cost of LTC = 800Q – 10Q^2 +
0.1Q^3.
a. In long-run equilibrium, how much will each firm produce?
b. What is the long-run equilibrium price?
c. The industry's demand curve is QD = 40,000 – 70P. How many
units do consumers buy in long-run equilibrium? How many firms are
in the industry?
d. Suppose the industry's demand curve rises to QD = 40,600 –
70P....

Suppose that the market for painting services is perfectly
competitive. Painting companies are identical; their long-run cost
functions are given by:
TC(Q) = 5 q3 - 45 q2 + 250 q
If the market demand is:
QD = 7,000 - 6 P
1. What is the quantity of output that minimizes average total
cost?
2. What is the long run equilibrium price?
3. Using market demand, what is the equilibrium total industry
output?
4. What is the equilibrium number...

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