Question

Suppose we have a perfectly competitive market where at the equilibrium price the total market demand...

Suppose we have a perfectly competitive market where at the equilibrium price the total market demand is 300 units. Each individual firm in the market has a cost function C(Q) = 50 -2Q + 0.9Q^2. The number of firms this market can support in the long run is _____?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

We assume that the market is in long run equilibrium and at this stage the total market demand is 300 units which is a supplied by all the firms existing in the market

Marginal cost is given by MC = 1.8Q - 2 and average cost is given by AC = 50/Q - 2 + 0.9Q. in the long run the price should be equal to the marginal cost as well as to the average cost. This implies

1.8Q - 2 = 50/Q - 2 + 0.9Q

0.9Q = 50/Q

This gives Q = 7.45 units

In the long run there will be 300/7.45 = 40 firms.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider a perfectly competitive market where the market demand curve is p(q) = 1000-q. Suppose there...
Consider a perfectly competitive market where the market demand curve is p(q) = 1000-q. Suppose there are 100 firms in the market each with a cost function c(q) = q2 + 1. (a) Determine the short-run equilibrium. (b) Is each firm making a positive profit? (c) Explain what will happen in the transition into the long-run equilibrium. (d) Determine the long-run equilibrium.
Consider a perfectly competitive market where the market demand curve is p(q) = 1000 − q....
Consider a perfectly competitive market where the market demand curve is p(q) = 1000 − q. Suppose there are 100 firms in the market each with a cost function c(q) = q2 + 1. (a) Determine the short-run equilibrium. (b) Is each firm making a positive profit? (c) Explain what will happen in the transition into the long-run equilibrium. (d) Determine the long-run equilibrium.
Suppose that the perfectly competitive for market for milk is made up of identical firms with...
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...
Suppose a firm operates in a perfectly competitive market where every firm has the same cost...
Suppose a firm operates in a perfectly competitive market where every firm has the same cost function given by: C(q)=5q2+q+20 Suppose the market price changes. Below what price will this firm shut down? (what is the "shut-down price"). Sandboxes are produced according to the following cost function: c(q) = q2 + 100 where the fixed cost of 100 represents an annual license fee the firms pay. Every firm uses the same technology to produce sanboxes. Recent trends have increased the...
The long run cost function for each (identical) firm in a perfectly competitive market is  C(q) =...
The long run cost function for each (identical) firm in a perfectly competitive market is  C(q) = q1.5 + 16q0.5 with long run marginal cost given by LMC = 1.5q0.5 + 8q-0.5, where  q is a firm’s output. The market demand curve is  Q = 1600 – 2p, where Q  is the total output of all firms and p  is the price of output. (a) Find the long run average cost curve for the firm. Find the price of output and the amount of output...
3: For each (identical) firm in a perfectly competitive market the long-run cost function is C(q)...
3: For each (identical) firm in a perfectly competitive market the long-run cost function is C(q) = q1.5 + 16q0.5 with long run marginal cost being LMC = 1.5q0.5 + 8q-0.5, where q = firm’s output. Market demand curve: Q = 1600 – 2p, where Q = total output of all firms, and p = price of output. (a) For the firm find the long run average cost curve , as well as the price of output and the amount...
Question 3 The long run cost function for each (identical) firm in a perfectly competitive market...
Question 3 The long run cost function for each (identical) firm in a perfectly competitive market is  C(q) = q1.5 + 16q0.5 with long run marginal cost given by LMC = 1.5q0.5 + 8q-0.5, where  q is a firm’s output. The market demand curve is  Q = 1600 – 2p, where Q  is the total output of all firms and p  is the price of output. (a) Find the long run average cost curve for the firm. Find the price of output and the amount...
In the short run there are 400 firms in a perfectly competitive market, all with the...
In the short run there are 400 firms in a perfectly competitive market, all with the same total cost function: SRTC = 2.5q2 + 5q + 40. Suppose the market demand curve is represented by P = 165 - 0.0875Q. The profit earned by each firm in the short run is a. $0 b. -$40 c. -$50 d. $30 e. $75 Each firm in a perfectly competitive market has long-run total cost represented as LRTC = 100q2 - 10q +...
The total cost function for each firm in a perfectly competitive industry is TC(y)=100+8y^2 . Market...
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.
Suppose a perfectly competitive market is originally in equilibrium. Due to a negative demand shock, the...
Suppose a perfectly competitive market is originally in equilibrium. Due to a negative demand shock, the market price falls below the ATC curve of Firm A, one of the many firms selling in the market. What will Firm A do in the short-run? What about the long run? Illustrate your answers graphically
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT