Question

A perfectly competitive industry has 100 identical firms in the short run, each of which has the short-run cost curves listed in Table 1 Output (Q) units Marginal Cost, 12 13 14 Average Total Cost Average Variable Cost, $ 20.5 13.1 19.8 13.0 193 131 19.1 13.3 19.0 136 191 1 40 192 14.5 195 150 19.8 15.6 20.3 16.2 169 20 21 The industry demand schedule is the same in the long run and in the short run. Table 2 provides some points on the demand schedule Price, Quantity demanded, in hundreds of units 32 30 28 26 24 22 18 16 14 12

cost curves listed in table 1. table 2 is some points in the demand schedule.

this is ALL of the information provided in the question.

Answer 1

G. In the long run the perfectly competitive firms earn zero profit. Therefore, P = Minimum ATC.

From table 1 we can see the minimum ATC $ 19 and output is 15 units.

Therefore, long run equilibrium price = $ 19.

H. At a price of $ 19 quantity demanded = 2,800 units

Number of firms = 2800 / 15 = 186.67

Number of firms = 187

F. Kindly provide the price of the output in the short run then only it can be answered.

On the basis of answer to H we can conclude that the industry is not in long run equilibrium as in the long run the number of firms is greater than the number of firms in the short run.

We can further conclude that the firms were earning economic profit in the short run therefore the price must be greater than ATC. As in the long run more number of firms enter this will lower the price as the supply has increased.

For answering question f. The short run price is required of information from previous questions. Here on the basis of the assumption that in the short run the perfectly competitive firms maximize profit at P =MC.

If the price is above the minimum AVC then the firms will operate otherwise they will exit from the industry. Kindly provide the present size or Price will answer this part.

Please share the price through comment will answer the part f. Please contact through comments will be obliged to you for your generous support. Your help mean a lot to me, please help. Thank you.