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

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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