Consider a perfectly competitive market with the market demand function Qd = 1000 − 10p There are many small, identical firms in the market. Each firm has the marginal cost function: MC = 10 + 10q and the average total cost function: ATC = 45/q + 10 + 5q (a) Suppose the equilibrium price is currently 30 (in the short run). Determine the quantity sold by each firm, the market equilibrium quantity, and the number of firms there must be in the market. Hint: Once you know the market quantity and quantity per firm, you can back out the number of firms. (b) If entry and exit is possible in the long run, determine long-run equilibrium price, quantity sold by each firm, the market equilibrium quantity, and the number of firms there will be

Consider a perfectly competitive market with the market demand function Qd = 1000 − 10p There are many small, identical firms in the market. Each firm has the marginal cost function: MC = 10 + 10q and the average total cost function: ATC = 45/q + 10 + 5q (a) Suppose the equilibrium price is currently 30 (in the short run). Determine the quantity sold by each firm, the market equilibrium quantity, and the number of firms there must be in the market. Hint: Once you know the market quantity and quantity per firm, you can back out the number of firms. (b) If entry and exit is possible in the long run, determine long-run equilibrium price, quantity sold by each firm, the market equilibrium quantity, and the number of firms there will be

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.9P

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