Question

Suppose a representative firm in a perfectly competitive industry has the following total cost of
production in the short run: TC = Q³ - 60Q² + 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