A perfectly competitive industry has a large number of potential entrants. Short-Run total cost is STC=0.1q²+40 and all firms have identical cost structure. They all minimize cost at the same point where Min AC-MC and are at their long run equilibrium. 1-Find the quantity and the cost of every firm at that point. If total market demand is P = 12-600- 2-Find the total quantity demanded in the market and the corresponding number of firms. 3-Derive the market supply curve and calculate the total Welfare (CS+PS) in this market. Due to an increase in Income consider that demand shifted to P = 15- 4-What will be the new market equilibrium price and quantity? What will be the output/firm in the short-run? 600. Since entry and exit is possible in the long-run cost. 5-What should the new number of firms become to satisfy this quantity and derive the new market supply?
A perfectly competitive industry has a large number of potential entrants. Short-Run total cost is STC=0.1q²+40 and all firms have identical cost structure. They all minimize cost at the same point where Min AC-MC and are at their long run equilibrium. 1-Find the quantity and the cost of every firm at that point. If total market demand is P = 12-600- 2-Find the total quantity demanded in the market and the corresponding number of firms. 3-Derive the market supply curve and calculate the total Welfare (CS+PS) in this market. Due to an increase in Income consider that demand shifted to P = 15- 4-What will be the new market equilibrium price and quantity? What will be the output/firm in the short-run? 600. Since entry and exit is possible in the long-run cost. 5-What should the new number of firms become to satisfy this quantity and derive the new market supply?
Chapter12: The Partial Equilibrium Competitive Model
Section: Chapter Questions
Problem 12.4P
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