2) Long run market equilibrium Consider a market with small, identical, price-taking firms, each of which has long run total cost: TC = 3q² + a) Calculate marginal and average costs. What is each firm's exit price, and what is the minimum quantity each would be willing to supply? b) Find the long-run equilibrium price if this market is perfectly competitive. c) If market demand is given by QD = 10 – P, how many firms will this market have in the long run perfectly competitive equilibrium? d) If demand for this product increases to Qº = 23 – P, how many more firms will enter the market? e) Find the firm-level supply function g$(P). Did you need to find it before now?
2) Long run market equilibrium Consider a market with small, identical, price-taking firms, each of which has long run total cost: TC = 3q² + a) Calculate marginal and average costs. What is each firm's exit price, and what is the minimum quantity each would be willing to supply? b) Find the long-run equilibrium price if this market is perfectly competitive. c) If market demand is given by QD = 10 – P, how many firms will this market have in the long run perfectly competitive equilibrium? d) If demand for this product increases to Qº = 23 – P, how many more firms will enter the market? e) Find the firm-level supply function g$(P). Did you need to find it before now?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Give an explanation to the answer and ensure all the steps are shown.
Transcribed Image Text:2) Long run market equilibrium
3
Consider a market with small, identical, price-taking firms, each of which has long run total cost: TC = 3q² + .
a) Calculate marginal and average costs. What is each firm's exit price, and what is the minimum quantity
each would be willing to supply?
b) Find the long-run equilibrium price if this market is perfectly competitive.
c) If market demand is given by QD = 10 – P, how many firms will this market have in the long run perfectly
competitive equilibrium?
d) If demand for this product increases to Q"
e) Find the firm-level supply function q$ (P). Did you need to find it before now?
= 23 – P, how many more firms will enter the market?
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