Suppose that the market demand for a product is given by ( A > 0 and B > 0). Suppose QABP=-also that in a competitive industry the typical firm’s cost function is given by (k > 2()Cqkaqbq=++0, a > 0 and b > 0).(a) Calculate the long-run equilibrium market price and the output for the typical firm. (b) Calculate the equilibrium number of firms in the market.(c) Describe how changes in the demand parameters A and B affect the equilibrium number of firms in this market. Explain your results intuitively. 3. Suppose that the market demand for a product is given by Q = A- BP (A>0 and B > 0). Supposealso that in a competitive industry the typical firm's cost function is given by C(q)=k+aq+bq (k>0, a >0 and b > 0).(a) Calculate the long-run equilibrium market price and the output for the typical firm.(b) Calculate the equilibrium number of firms in the market.(c) Describe how changes in the demand parameters A and B affect the equilibrium number of firms inthis market. Explain your results intuitively.

a) Market Demand Function Q = A- BP (A 70, B70) Cost function of firm= c(q) = k +aq+ bq2 MC for a…

Answered: 3. Suppose that the market demand for a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that the market demand for a product is given by ( A > 0 and B > 0). Suppose QABP=-also that in a competitive industry the typical firm’s cost function is given by (k > 2()Cqkaqbq=++0, a > 0 and b > 0).(a) Calculate the long-run equilibrium market price and the output for the typical firm. (b) Calculate the equilibrium number of firms in the market.(c) Describe how changes in the demand parameters A and B affect the equilibrium number of firms in this market. Explain your results intuitively.

3. Suppose that the market demand for a product is given by Q = A- BP (A>0 and B > 0). Suppose
also that in a competitive industry the typical firm's cost function is given by C(q)=k+aq+bq (k>
0, a >0 and b > 0).
(a) Calculate the long-run equilibrium market price and the output for the typical firm.
(b) Calculate the equilibrium number of firms in the market.
(c) Describe how changes in the demand parameters A and B affect the equilibrium number of firms in
this market. Explain your results intuitively.

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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