1. In a perfectly competitive and constant cost industry, all firms are identical. If the market demand function is: Qº = 600 – P, a typical firm's cost function is: TC = 20q² + 120q. a. In the long run, what is the firm's equilibrium production decision? b. In the long run, what is the market equilibrium price and quantity? What is the industry's long-run supply curve? c. In the long run, how many firms will stay in the industry? d. If the government decide to impost a $7 tax per unit, what is the new long-run equilibrium market price and quantity? e. How many firms are producing after the tax? q3
1. In a perfectly competitive and constant cost industry, all firms are identical. If the market demand function is: Qº = 600 – P, a typical firm's cost function is: TC = 20q² + 120q. a. In the long run, what is the firm's equilibrium production decision? b. In the long run, what is the market equilibrium price and quantity? What is the industry's long-run supply curve? c. In the long run, how many firms will stay in the industry? d. If the government decide to impost a $7 tax per unit, what is the new long-run equilibrium market price and quantity? e. How many firms are producing after the tax? q3
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1. In a perfectly competitive and constant cost industry, all firms are identical. If the
market demand function is: QD =
20q2 + 120q.
In the long run, what is the firm's equilibrium production decision?
b. In the long run, what is the market equilibrium price and quantity? What is the
industry's long-run supply curve?
In the long run, how many firms will stay in the industry?
d. If the government decide to impost a $7 tax per unit, what is the new long-run
equilibrium market price and quantity?
How many firms are producing after the tax?
600 – P, a typical firm's cost function is: TC = q³ -
a.
С.
е.
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