Every firm in the perfectly competitive gumball industry has the following long-run total cost function: TC = 0.2q³ – 4q² + 30q, where q is the output of each firm. The market demand for gumballs is of the form Qp = 100 – P, where Qp is the total amount demanded, and P is the market price. Firms are free to enter and exit the gumball industry in the long run. Each firm has the same U- shaped long-run Average Total Cost curve. A. Find the equation for the long-run average total cost and the long-run marginal cost. B. Find the long-run equilibrium level of output of each firm in the gumball industry. C. Find the long-run equilibrium price and the long-run equilibrium industry output level.
Every firm in the perfectly competitive gumball industry has the following long-run total cost function: TC = 0.2q³ – 4q² + 30q, where q is the output of each firm. The market demand for gumballs is of the form Qp = 100 – P, where Qp is the total amount demanded, and P is the market price. Firms are free to enter and exit the gumball industry in the long run. Each firm has the same U- shaped long-run Average Total Cost curve. A. Find the equation for the long-run average total cost and the long-run marginal cost. B. Find the long-run equilibrium level of output of each firm in the gumball industry. C. Find the long-run equilibrium price and the long-run equilibrium industry output level.
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter9: Price Takers And The Competitive Process
Section: Chapter Questions
Problem 5CQ
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Transcribed Image Text:Every firm in the perfectly competitive gumball
industry has the following long-run total cost
function: TC = 0.2q³ – 4q² + 30q, where q is the
output of each firm. The market demand for
gumballs is of the form Qp = 100 – P, where Qp is
the total amount demanded, and P is the market
price. Firms are free to enter and exit the gumball
industry in the long run. Each firm has the same U-
shaped long-run Average Total Cost curve.
A. Find the equation for the long-run average total
cost and the long-run marginal cost.
B. Find the long-run equilibrium level of output of
each firm in the gumball industry.
C. Find the long-run equilibrium price and the
long-run equilibrium industry output level.
D. How many identical firms will there be in long-
run equilibrium?
- 4q?
%3D
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