Calculate the long ran equilibrium output of each dupoly,market price, ,and economic profits of each firm and the industry profit as whole.
To calculate the long-run equilibrium output, market price, economic profits of each firm, and industry profit, we need to follow a few steps:
Step 1: Determine the industry demand and supply curves: Obtain the demand curve for the industry by summing up the individual demand curves of the firms in the market. The supply curve for the industry is derived by adding up the individual supply curves of all the firms.
Step 2: Find the intersection of the industry demand and supply curves: The equilibrium market price and quantity will be determined at the point where the industry demand and supply curves intersect.
Step 3: Determine the individual firms' output and price: In perfect competition, each firm is a price-taker, meaning that they have no market power and must accept the prevailing market price. The individual firm's output will be determined by the point where its marginal cost (MC) intersects with the market price.
Step 4: Assess economic profits: Economic profit is the difference between total revenue (TR) and total cost (TC). In the long run, firms will adjust their inputs and outputs until economic profits are zero. If firms are making positive economic profits, new firms will enter the market, increasing supply and driving prices down. Conversely, if firms are making losses, some firms may exit the market, reducing supply and driving prices up.
Step 5: Determine industry profit: Industry profit is calculated by multiplying the market price by the equilibrium output.
Now, let's assume we have the necessary data (demand curves, cost curves, etc.) and apply these steps to calculate the equilibrium output of each firm, market price, economic profits of each firm, and industry profit as a whole.