C1: PERFECT COMPETITION Suppose we have many firms each with an individual supply curve of q³= ½P). Assume that firms have a quasi-fixed cost of $5000 (that is COST = 0 if they exit but COSTS = 5000+ variable costs if they are open). Hence Cost = q² + 5000 if active. Individual demand is Qº= 100-½ P (d) Now let the number of firms change so that each firm's profits are zero. How many firms will there be in the long-run equilibrium? Show and explain why the long-run equilibrium price is $141.42. (e) Now suppose the number of consumers rises to 1000. Show and explain what happens to long- run equilibrium price and number of firms. Explain the idea behind the result.

C1: PERFECT COMPETITION Suppose we have many firms each with an individual supply curve of q³= ½P). Assume that firms have a quasi-fixed cost of $5000 (that is COST = 0 if they exit but COSTS = 5000+ variable costs if they are open). Hence Cost = q² + 5000 if active. Individual demand is Qº= 100-½ P (d) Now let the number of firms change so that each firm's profits are zero. How many firms will there be in the long-run equilibrium? Show and explain why the long-run equilibrium price is $141.42. (e) Now suppose the number of consumers rises to 1000. Show and explain what happens to long- run equilibrium price and number of firms. Explain the idea behind the result.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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HELP PLEASE!!! There are two questions here. 1. Is the firm maximizing profit? 2. What quantity of output should the firm produce in the long run?
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