Question

Suppose there are n identical firms in the market for plums. Each firm's cost function is given by C(q)=25+q^2 where q represents the amount that an individual firm will produce. Also, the market demand for plums is given by P = 100 - 2Q, where Q is the total amount of the good produced by all the firms combined (Q=q*n). How much output will each firm produce in the long run? What will be the long run equilibrium price? How many firms will there be in the market?

Answer 1

Solution The Cost fune to n each tm IS Juesn by Clal 2 5 + the the tirm wil In te long lauel /a) 1un output at which tha auarage Mininuzed Cos t cla) 25t4/2 A clN) 2 5 V V Ac/4) al 26 - 25 2 pioduce 5 unit ofOutput wil Therefere eath pica Peauuali the eauals Condition is Lang .The equuli btu Cost auerage ughich als eauilibsrum t The P =LRACニML - 25 a 25 510 LRAC に 10 M C 2V 1 P LRAC = MC =0 eauilibotium nunber of frms denand eauation To tind in tha the the market P = 100-2 a P I00-2/n At P 10 aj

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