The market for good X consists of 1,000 identical firms, each with the total and marginal cost functions shown: TC = 80 + 0.001Q2 MC = 0.002Q, where Q is measured in units per year. The market demand curve for good X is Q= 900,000 - 400,000P, where Q is again measured in units and P is the price per unit. a. Determine the short-run equilibrium price and quantity that would exist in the market. b. Calculate the profit maximizing quantity for the individual firm. Calculate the firm's short-run profit (loss) at that quantity. c. Assume that the short-run profit (or loss) is representative of the current long-run prospects in this market and there are no barriers to entry or exit in the market. Describe the expected long-run response to the conditions described in part b. State what changes are expected to be observed in quantity of firms, an individual firm's output in the long run , price of good X, and profits (or losses).
The market for good X consists of 1,000 identical firms, each with the total and marginal cost functions shown:
TC = 80 + 0.001Q2
MC = 0.002Q,
where Q is measured in units per year. The market demand curve for good X is Q= 900,000 - 400,000P, where Q is again measured in units and P is the
a. Determine the short-run
b. Calculate the profit maximizing quantity for the individual firm. Calculate the firm's short-run profit (loss) at that quantity.
c. Assume that the short-run profit (or loss) is representative of the current long-run prospects in this market and there are no barriers to entry or exit in the market. Describe the expected long-run response to the conditions described in part b. State what changes are expected to be observed in quantity of firms, an individual firm's output in the long run , price of good X, and profits (or losses).
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