Question

Consider a perfectly competitive industry, which consists of many identical firms; all of them characterized by the following long run average and marginal cost curves: LATC = 2400-30Q+0.3Q^2 and LMC = 2400-60Q+0.9Q^2 a. In the long run equilibrium, how much will each firm produce? b. What will be the long run equilibrium price? c. What is the profit of each individual firm in this case? Briefly explain why.

Answer 1

3) there are no barriers to entry and exit by the firms in this market as if firms are earning losses then it may exit the firm easily and if firms are earning super profits then more firms can enter into the industry also.

22 Kuw- LATO C_0.30- 30 Q + 2400 LMc. *0.90-600 + 2400 मित खा पल LATC a LMC 0.302- 300+ 2400 = 600+ 2400 ०.१०२ 24 0.60, 30 Q SO 0 32 0 Price = LATCELMC Co PI (0.3)so) - 3050)+ 240 7 750 1500+ 2400 1650 -

Hence, the long run economic profit in perfe t competitive makret is always zero.