Posted by john on Sunday, November 13, 2011 at 6:03am.
since the AC curve in the problem is upward-sloping everywhere, it is not possible to construct a zero-profit equilibrium given the assumptions of the problem (this outcome requires a U-shaped AC curve). this problem will consider an alternative example where a long-run equilibrium exists. let the total cost function for an individual firm be give by C = 240Q - 40Q^2 + 2Q^3. compute average cost for Q = 1, 2, 3,...,14, 15.
a) using your results, find the long-run equilibrium price in the market. this price is given by p = ?, and output per firm is Q = ?.
b) suppose that the (inverted) market demand curve for the product is given by Q = 50000 - 10000P. what total quantity is demanded at the long-run equilibrium price?
c) from (b), you know how much total output must be delivered by all firms operating int he long-run equilibrium. using this number along with the results from part (a), compute the number of firms in the industry in the long-run equilibrium. this number is ?.
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