Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. Suppose that the industry is a
constant cost industry and entry
and exit of firms are allowed.
Assume the firm's long-run
cost function is given by
LC =g'-0.2g' + 4q .
a. Identify the most efficient
plant size for the firm in the
long-run by calculating the
equilibrium output level.
Brief discuss the process
used to get your answer.
b. Calculate the long-run
equilibrium market price in
this industry. Brief discuss
the process used to get your
answer.
c. If the market demand for
these firm's product is Q =
8,000 - 200p", determine
the number of firms in the
market under a long-run
equilibrium. Brief discuss
the process used to get your
answer.
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