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Consider a publicly available technology of producing a good that is characterized by the variable cost function VC(Q) = Q2 and fixed costs FC =
Consider a publicly available technology of producing a good that is characterized by the variable cost function VC(Q) = Q2 and fixed costs FC = 16 for a firm that operates the technology. Fixed costs are unavoidable in the short run and avoidable in the long run. In the long run, there is free entry of firms. Aggregate demand is given by Q" (P) = 200 - 20P. Firms are perfectly competitive. (a) What is the efficient scale of production (i.e., quantity of production in the long- run)? (b) In the long run equilibrium, what must the output price be? (c) How many firms are there in the market in the long run
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