Question

Suppose that all existing firms in a long-run competitive market equilibrium are identical and have the following cost function C(Q)= 1002 with MC(Q)=2Q. Suppose also that market demand is given by P(Q)=A-0.04Q, where A-40.0. What is the equilibrium market quantity? No units, no rounding. Your Answer: Your Answer

Answer 1

Q11
the firm produces at MC=ATC inn long run where P=ATC
MC=2Q
ATC=C/Q=100/Q+Q
2Q=100/Q+Q
Q=100/Q
Q^2=100
Q=10
P=ATC=100/10+10=20

the equilibrium production of the market is
P=A+0.04Q
A=40 and P=20
20=40-0.04Q
0.04Q=20
Q=500 units
the quantity is 500 units