Each firm in a perfectly competitive market has long run average cost represented as AC(q) =...
- Each firm in a perfectly competitive market has long run average cost represented as AC(q) = 100q- 10+100/q. Long run marginal cost is MC=200q-10. The market demand is Qd = 2150-5P. Find the long run equilibrium output per firm, q*, the long run equilibrium price, P*, and the number of firms in the industry, n*.
P = 190; Q = 1200; q =1 , n = 1200
Homework Answers
In long run equilibrium, AC = MC = P.
100q - 10 + (100/q) = 200q - 10
100q = 100/q
q2 = 1
q = 1
P = MC = (200 x 1) - 10 = 200 - 10 = 190
Qd = 2150 - (5 x 190) = 2150 - 950 = 1200
n = Qd / q = 1200/1 = 1200
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