Consider a perfectly competitive industry where the typical firm has long run Total Cost TCLR = q2 + 2q + 196. a) Find the minimum efficient scale of the typical firm. MES = 30 b) Find the long run equilibrium price. P = 30 Suppose demand in this industry is Qd = 1,700 – 10P. c) Find the long run equilibrium quantity and how many firms can survive in this industry in the long run. Equilibrium Quantity = 1400 and # of firms = 100 Suppose government introduces a $10 per unit tax collected from sellers. d) The tax alters the long run total cost of the typical firm. In which way? e) Does the tax affect the minimum efficient scale of the typical firm? f) In the long run, by how much will the equilibrium price increase in response to the tax?
d, e, & f
Consider a
a) Find the minimum efficient scale of the typical firm.
MES = 30
b) Find the long run
P = 30
Suppose demand in this industry is Qd = 1,700 – 10P.
c) Find the long run
Equilibrium Quantity = 1400 and # of firms = 100
Suppose government introduces a $10 per unit tax collected from sellers.
d) The tax alters the long run total cost of the typical firm. In which way?
e) Does the tax affect the minimum efficient scale of the typical firm?
f) In the long run, by how much will the equilibrium price increase in response to the tax?
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