Suppose you are given the following information about a particular perfectly competitive industry:
QD= 6500-100P .....Market demand
QS= 1200P .....Market Supply
C(Q)=722+(Q2)/200 ......Firm's total cost function
Assume all firms in this perfectly competitive industry are identical.
a) Find the equillibrium price and the equilibrium quantity for the entire industry, the output supplied by the firm, and the profit of each firm.
b) Would you expect to see entry into or exit from this industry in the long run? Explain. What effect will entry or exit have on market equilibrium?
c) Suppose the long run total cost function is given by C(Q) = 6Q-3Q2+Q3. What will the price be in long run equilibrium in this industry? Is profit positive, negative or zero? Explain.
Suppose you are given the following information about a particular perfectly competitive industry:
QD= 6500-100P .....Market demand
QS= 1200P .....Market Supply
C(Q)=722+(Q2)/200 ......Firm's total cost function
Assume all firms in this perfectly competitive industry are identical.
a) Find the equillibrium price and the equilibrium quantity for the entire industry, the output supplied by the firm, and the profit of each firm.
b) Would you expect to see entry into or exit from this industry in the long run? Explain. What effect will entry or exit have on market equilibrium?
c) Suppose the long run total cost function is given by C(Q) = 6Q-3Q2+Q3. What will the price be in long run equilibrium in this industry? Is profit positive, negative or zero? Explain.
