HW chap 14-6

Whatisthelongrunmarketsupplycurve

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Unformatted text preview: t is MC = 12 + (Q/20). In the long run firms may enter the market freely. What is the long­run market supply curve? A horizontal line at P = $13.87. Explanation: Step 1: Equate average cost (AC) to marginal cost (MC). http://e z to.mhe c loud.mc gr a w- hill.c om/hm.tpx? todo= pr intvie wSingle 1/2 1/21/2014 Assignme nt Pr int Vie w AC = (35/Q) + 12 + (Q/40). MC = 12 + (Q/20). (35/Q) + 12 + (Q/40) = 12 + (Q/20). Step 2: Solve for Q. Q = 37.43. Step 3: Compute ACmin at Q = 37.43. ACmin = (35/37.43) + 12 + (37.43/40). ACmin = 13.87. When there is free entry, long­run market supply is a horizontal line at: P = ACmin = 13.87. http://e z to.mhe c loud.mc gr a w- hill.c om/hm.tpx? todo= pr intvie wSingle 2/2...
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This note was uploaded on 01/22/2014 for the course ECO 3352 taught by Professor Ax during the Fall '13 term at Troy.

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