Suppose there are n identical firms in a market. Each firm has fixed cost equal to 392, and variable cost given by VC = 2q2, where q is the amount that an individual firm produces. This means that an individual firm’s marginal cost is given by MC = 4q. Also, the market demand is given by. P = 1148 – 3Q, where Q is the total amount of the good produced by all of the firms combined. Therefore, Q = n*q.
(a) How much output will each of them produce?
(b) What will be the market price?
(c) How many firms will there be in long run equilibrium?

  • CreatedAugust 05, 2013
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