Suppose that the market for gasoline is a perfectly competitive market. All gas station owners face the following long-run average total cost curve: ATC = 0.01q – 1+ 100/q. long-run marginal cost curve: MC = 0.02q – - 1. a. What will the economic profits be in the long run for this industry when it is in (the long-run) equilibrium? What does that imply about the relationship among price, ATC, and MC at the profit-maximizing production level in the long run? b. Assuming that the market is in long-run equilibrium, how much gas will be sold by the firm (assuming the firm is profit- maximizing)?
Suppose that the market for gasoline is a perfectly competitive market. All gas station owners face the following long-run average total cost curve: ATC = 0.01q – 1+ 100/q. long-run marginal cost curve: MC = 0.02q – - 1. a. What will the economic profits be in the long run for this industry when it is in (the long-run) equilibrium? What does that imply about the relationship among price, ATC, and MC at the profit-maximizing production level in the long run? b. Assuming that the market is in long-run equilibrium, how much gas will be sold by the firm (assuming the firm is profit- maximizing)?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose that the market for gasoline is a
perfectly competitive market. All gas station
owners face the following long-run average
total cost curve: ATC = 0.01q – 1+ 100/q.
long-run marginal cost curve: MC = 0.02q -
1.
a. What will the economic profits be in the
long run for this industry when it is in (the
long-run) equilibrium? What does that
imply about the relationship among price,
ATC, and MC at the profit-maximizing
production level in the long run?
b. Assuming that the market is in long-run
equilibrium, how much gas will be sold by
the firm (assuming the firm is profit-
maximizing)?
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