Question

DURC Cakes. - 9. The market for a perfectly competitiv arket for a certain good traded in the peaceful country of Amylandia is tly competitive. Currently, three types of firms produce the good. The firms se the following cost functions: (Here the constants 242, 192, and 100 are fixed costs; they cannot be escaped.) Type 1 firms: C (yi) = 2y + 242. Type 2 firms: C22) = 3y2 + 192. Type 3 firms: C3(93) = 4yz + 100. The market demand function for the good is y = 1200 - 3p. In the short run, there are 24 type 1 firms, 24 type 2 firms, and 16 type 3 firms. What is the equilibrium price of the good?

Answer 1

The equilibrium for a perfectly competitive firms exists at the point where P = MC.

Calculate the quantity supplied by the 3 types of firms as follows:

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$KfZOGgAAAABJRU5ErkJggg==$

Now, market supply is calculated by horizontally adding the quantities supplied by the 3 types of firms.

Market Equilibrium exists where the market supply becomes equal to the market demand

Therefore, equilibrium price is $80