A number of stores offer film developing as a service to their customers. Suppos

Question

A number of stores offer film developing as a service to their customers. Suppose that each store offering this service has a cost function (C) and a marginal cost (MC) of 

Find the price associated with long-run equilibrium
The market will be in long-run equlibrium when the price is what? (round to two decimal places)

A number of stores offer film developing as a service to their customers. Suppose that each store offering this service has a cost function (C) and a marginal cost (MC) of C(q) =50+ 0.20q + 0.0800q^2 MC(q) = 0.20 + 0.1 60q. Find the price associated with long-run equilibrium The market will be in long-run equlibrium when the price is what? (round to two decimal places)

Explanation / Answer

C(q) = 50+0.20q+0.0800q2

MC(q)=0.20+0.160q

In the long run market will be in equilibrium when P=MC=ATC=LRAC=LRMC

where LRAC=long run average cost curve

LRMC=long run marginal cost curve

ATC=average total cost

noe total cost C(q)= 50+0.20q+0.0800q2

therefore ATC=C(q)/q

= 50/q + 0.20 + 0.0800q

therefore in long run MC=ATC

0.20+0.160q=50/q + 0.20 + 0.0800q

on solving q=25

therefore P=ATC=MC=0.20+0.160q

=0.20+0.16*25

P = 4.20

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