Suppose there is free entry in the market for microphones. The demand for microphones is given by: QD= 2779 -7P. All firms that produce microphones have identical long run average total cost functions given by: ATC = 3528/q + 7 + 8q.
Calculate the long run number of firms in this market.
Answer
The long-run price of a perfectly competitive market is equal to the minimum average total cost.
The output at minimum average total cost is found by differentiating ATC and equating to zero.
dATC/dQ=-3528/q^2+8=0
q^2=3528/8
q^2=441
q=21
P=ATC=3528/21+7+8*21
P=343
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the market quantity is
Q=2779-7*343
Q=378
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Number of firms =Q/q=378/21=18
the number of firms in the long run is 18
Suppose there is free entry in the market for microphones. The demand for microphones is given...
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