Question: Suppose a representative firm in a perfectly competitive constant cost industry

Suppose a representative firm in a perfectly competitive, constant-cost industry has a cost function TC = 4Q2 + 100Q + 100.
a. What is the long-run equilibrium price for this industry?
b. If market demand is given by the function Q = 1000 - P, where P denotes price, how many firms will operate in this long- run equilibrium?
c. Suppose the government grants a lump-sum subsidy to each firm that manufactures the product. If this lump- sum subsidy equals 36, what would be the new long-run equilibrium price for the industry?

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  • CreatedDecember 12, 2014
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