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2. Suppose you have many identical firms in a long run competitive equilibrium. Each firm's average cost function is given by AC = 0.1 +0.05q +, and the marginal cost function is given by MC = 0.1 +0.1q. Demand in this market is given by P = 13.10.04Q, where Q is the entire market output. (a) How much will each firm produce? What will be the whole market output? How many firms will there be? (b) Suppose the market demand changes to P = 15.1 -0.04Q. What is the market outcome now? (Market output, each firm's output, number of firms). (c) Illustrate equilibria from parts (a) and (b) on a graph with the demand curves and the long run supply curve.

2. Suppose you have many identical firms in a long run competitive equilibrium. Each firm's average cost function is given by AC = 0.1 +0.05q +, and the marginal cost function is given by MC = 0.1 +0.1q. Demand in this market is given by P = 13.10.04Q, where Q is the entire market output. (a) How much will each firm produce? What will be the whole market output? How many firms will there be? (b) Suppose the market demand changes to P = 15.1 -0.04Q. What is the market outcome now? (Market output, each firm's output, number of firms). (c) Illustrate equilibria from parts (a) and (b) on a graph with the demand curves and the long run supply curve.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. Suppose you have many identical firms in a long run competitive equilibrium. Each firm's average cost function is given by AC = 0.1 +0.05q + and the marginal cost function is given " q 5 by MC = 0.1 +0.1q. Demand in this market is given by P = 13.10.04Q, where Q is the entire market output. (a) How much will each firm produce? What will be the whole market output? How many firms will there be? (b) Suppose the market demand changes to P = 15.10.04Q. What is the market outcome now? (Market output, each firm's output, number of firms). (c) Illustrate equilibria from parts (a) and (b) on a graph with the demand curves and the long run supply curve.
Transcribed Image Text:2. Suppose you have many identical firms in a long run competitive equilibrium. Each firm's average cost function is given by AC = 0.1 +0.05q + and the marginal cost function is given " q 5 by MC = 0.1 +0.1q. Demand in this market is given by P = 13.10.04Q, where Q is the entire market output. (a) How much will each firm produce? What will be the whole market output? How many firms will there be? (b) Suppose the market demand changes to P = 15.10.04Q. What is the market outcome now? (Market output, each firm's output, number of firms). (c) Illustrate equilibria from parts (a) and (b) on a graph with the demand curves and the long run supply curve.
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