Question

You are a producer in a constant-cost perfectly competitive industry. Your long-run total, marginal, and average...

You are a producer in a constant-cost perfectly competitive industry. Your long-run total, marginal, and average costs are given by TC = 2Q² + 128, MC = 4Q, and ATC = 2Q+ (128/Q). What is the long-run equilibrium price?

Homework Answers

Answer #1

the long run equilibrium price is at min ATC in a perfectly competitive industry. in other words, price equal to minimum ATC in the long run so that the firms earn zero economic profits in long run.

ATC = 2Q+ (128/Q)

to find minimum ATC we take first order derivative of the ATC function

dATC/dq = 2 - 128/Q^2 = 0

128/Q^2 = 2

Q^2 = 256

Q = +-16, the negative value will be ignored.so Q = 16

ATC at Q = 16, =2*16+ (128/16) = 40

so P = ATC = 40 in the long run

The long run equilibrium price is $40.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A firm in a perfectly competitive constant cost industry has total costs in the short run...
A firm in a perfectly competitive constant cost industry has total costs in the short run given by: TC = 2q2 + 2q + 72 q ≥ 2 where q is output per day and TC is the total cost per day in dollars. The firm has fixed costs of $54 (already included in the TC equation above). The TC equation generates minimum average costs of $26 (per unit) at q = 6. You are also told that this size...
A perfectly competitive firm in the short run has Total Cost and Marginal Cost functions given...
A perfectly competitive firm in the short run has Total Cost and Marginal Cost functions given by TC(Q)=9+Q+Q2 and MC(Q)=1+2Q, respectively. The firm faces a price of P=$17. Determine the output that the firm will produce and the profit. Show the solution graphically.
1) A perfectly competitive firm that sells fish has a marginal cost function given by MC...
1) A perfectly competitive firm that sells fish has a marginal cost function given by MC = 3q. The market has determined a price of P = 60. How many fish will this firm produce? 2)See the previous question about the perfectly competitive fish firm. Suppose that at this level of output, the firm has average costs of production of ATC = 42. How much total economic profit will the firm earn? 3) A perfectly competitive firm will shut down...
a) In the long run in a competitive constant-cost industry A. A firm’s supply curve is...
a) In the long run in a competitive constant-cost industry A. A firm’s supply curve is upward sloping but the industry supply curve is perfectly elastic at the minimum of AVC. B. firm’s supply curve is upward sloping but the industry supply curve is perfectly elastic at the minimum of ATC. C. Both the industry and a firm’s supply curve are perfectly elastic at the minimum of ATC. 2)Which of the following is correct? A. In a competitive market buyers...
Suppose in Pakistan, all the firms are identical with identical cost curves which mean industry is...
Suppose in Pakistan, all the firms are identical with identical cost curves which mean industry is perfectly competitive. Now please consider this following information about the industry: A representative firm’s total cost is given by the equation TC = 100 + q2 + q where q is the quantity of output produced by the firm. You also know that the market demand for this product is given by the equation P = 1000 – 2Q where Q is the market...
Consider a perfectly competitive market with demand Q=1,000-4P. The marginal cost for each firm in the...
Consider a perfectly competitive market with demand Q=1,000-4P. The marginal cost for each firm in the market is constant at MC=4. Determine the competitive equilibrium price and quantity. . Graph demand, supply, and the equilibrium found in part A). Determine consumer surplus, producer surplus, and total surplus. Is consumer surplus or producer surplus equal to zero? Why or why not? Is this question representative of a long or short-run perfectly competitive market? How do you know?
Suppose a representative firm in a perfectly competitive industry has the following total cost of production...
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 QD = 12400 - 4P. how many firms will be active in the long- run equilibrium? c) Suppose the firm faces a...
A perfectly competitive firm’s total cost function is given by: TC = 400+4Q^2 . The minimum...
A perfectly competitive firm’s total cost function is given by: TC = 400+4Q^2 . The minimum point of average total cost (ATC) is reached at Q=10. You also know that the market demand function for this product is: QD=100-P. How many firms are in the market in the long-run? (Hint: first you need to find the price in the long-run) Select one: a. N=6 b. N=4 c. N=2 d. None of the above
Suppose that the market for painting services is perfectly competitive. Painting companies are identical; their long-run...
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...
1) A perfectly competitive firm's short-run supply curve is its: A. average variable cost curve above...
1) A perfectly competitive firm's short-run supply curve is its: A. average variable cost curve above the marginal cost curve. B. marginal cost curve above the average fixed cost curve. C. marginal cost curve above the average total cost curve. D. marginal cost curve above the average variable cost curve. 2)Economic Profit A. (per unit) is price minus average variable cost. B. is correctly described by all of these. C. as a total amount, is (P - ATC) times quantity....