October 26, 2010 - demand a Determine the firm’s long-run...

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1. Assume that there are 100 perfectly competitive firms with the same short-run total cost equation: STC = q 2 + 50. a. What is the equation for the market short-run supply curve? b. If the market demand equation is P = 1000 - 0.1Q, what is the short-run market equilibrium output and price? 2. Assume that the long-run total cost function for the typical firm in a perfectly competitive constant-cost industry is LTC = q 3 - 10q 2 + 1,000 for q > 0. Market demand is given by the equation P = 500 - 0.1Q. Note: q is the firm’s output and Q is the market
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Unformatted text preview: demand. a. Determine the firm’s long-run equilibrium output. b. Determine the market price and number of firms in long-run equilibrium. 3. Assume that the short-run total cost equation associated with the long-run equilibrium amount of capital in the previous problem equals STC = 5q 2 + 500. a. What is the equation for the market short-run supply curve? b. If the market demand increases to P = 1000 - 0.1Q, what will be the new short-run market equilibrium output and price?...
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