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Your consulting firm is hired to understand market conditions in a perfectly competitive industry. The cost function of your client in this industry is
Your consulting firm is hired to understand market conditions in a perfectly competitive industry. The cost function of your client in this industry is C(Q) = 40+20Q+Q2 and the total demand curve for the market in the short run is D(P) = 100-22 If you are observing the market price in the short run as P=30, answer the following questions, In the long run production technology changes and the cost function of the competitive firms becomes C = 16Ql/2+ Q2 after the fix costs are paid. You realized that the demand curve you estimated in the long run as D(P) = 100-2P is not the correct long run demand curve and there is no entry or exit to the market in the long run. Given the slope of the demand curve remains the same, what must be the market size so that there is no entry or exit in the long run and the number firms remain the same as in the short run.
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