Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hi can you help me with this question? I couldn't figure out how to place question e below question d, thus that is why is

Hi can you help me with this question? I couldn't figure out how to place question e below question d, thus that is why is e is at the top. Thanks!

image text in transcribedimage text in transcribed
Industry structure under perfect competition Suppose that a perfectly competitive (or \"price taking\") rm has the following (short-run) total cost function: TCCq) = qr2 + 100 where q is the quantity of output produced and where all costs are measured in dollars per unit. [Note: For simplicity, we will assume that all rms' short-run and long-run total/marginal cost functions are the same in this problem. Technically, there should be no xed costs in a long-run cost function, but please ignore this technicality and also use the above expression when considering long-run equilibrium. Note that the average total cost given above curve is roughly U- shaped] (a) Assume the price at which it can sell its output is P = 24 per unit. Calculate the short-run prot maximization quantity of output (q *) that the rm should produce and the amount of prot the rm makes at that output level (* = rr(q*)). (b) Now suppose that the market demand for the rm's output is given by QD(P) = 200 5P. In the long run there is free entry into this market by rms with the same cost structure. (Again, for simplicity, assume all rms' cost curves are the same as considered in part (a).) What is the equilibrium price and how much output will be produced by each rm in the long run? (0) How much output will supplied in the aggregate and (ii) how many rms will be in the market in the long run? (d) Suppose that the market demand curve now becomes QD(P) = 160 5P. In the long run, with this reduced demand, what will be the equilibrium market price and quantity and how many rms will be serving the market? (e) Based on your answers from part (d), graph the long-run market adjustment process and describe the path that prices will take

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Analyzing Superfund Economics, Science And Law

Authors: Richard L Revesz, Richard B Stewart

1st Edition

1317354796, 9781317354796

More Books

Students also viewed these Economics questions

Question

a. Which political changes have occurred within the past 5 years?

Answered: 1 week ago

Question

describe antecedents and consequences of quantitative job demands;

Answered: 1 week ago

Question

A 300N F 30% d 2 m Answered: 1 week ago

Answered: 1 week ago

Question

1. Build trust and share information with others.

Answered: 1 week ago