A perfectly competitive market has 1,000 firms. In the very short run, each of the firms has
Question:
A perfectly competitive market has 1,000 firms. In the very short run, each of the firms has a fixed supply of 100 units. The market demand is given by
Q = 160,000 – 10,000P
a. Calculate the equilibrium price in the very short run.
b. Calculate the demand schedule facing any one firm in the industry. Do this by calculating what the equilibrium price would be if one of the sellers decided to sell nothing or if one seller decided to sell 200 units. What do you conclude about the effect of any one firm on market price?
c. Suppose now that in the short run each firm has a supply curve that shows the quantity the firm will supply (qi) as a function of market price. The specific form of this supply curve is given by
qi = –200 + 50P
Using this short-run supply response, supply new solutions to parts a and b. Why do you get different solutions in this case?
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a Supply 100000 In equilibrium 100000 Q S Q D 160000 10000P or P 6 b For any one firm quantit...View the full answer
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