Consider a perfectly competitive industry with the following information Market

Question

Consider a perfectly competitive industry with the following information Market demand - p=(Q/40) -30 There is an unknown number of firms with identical cost structure given by C=.5(q^2)-10q+200 Each firm is earning zero profits (it is a long run equilibrium) A) how is a long run equilibrium characterized Consider a perfectly competitive industry with the following information Market demand - p=(Q/40) -30 There is an unknown number of firms with identical cost structure given by C=.5(q^2)-10q+200 Each firm is earning zero profits (it is a long run equilibrium) A) how is a long run equilibrium characterized Market demand - p=(Q/40) -30 There is an unknown number of firms with identical cost structure given by C=.5(q^2)-10q+200 Each firm is earning zero profits (it is a long run equilibrium) A) how is a long run equilibrium characterized

Explanation / Answer

-P=Q/40-30

P=30-Q/40

C=.5(q^2)-10q+200

For long run equilibrium P=MC(Marginal cost)

MC=dC/dQ

d(.5(q^2)-10q+200)/dQ=Q-10

P=MC

Q-10=30-Q/40

41Q/40=40

Q=160/41=3.9 unit

Thus in long run equilibrium Equilibrium quantity=3.9 unit

Thus price =30-3.9/4=$29.9

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