consider the following technology: C(y) = 4 + 8y + y^2 . all firms have this tec
ID: 2505973 • Letter: C
Question
consider the following technology: C(y) = 4 + 8y + y^2 . all firms have this technology, so there is no room for all to profitably operate in the industry. Market demand for the poduct is P = 135 - (1/2)Y, where Y is market quantity. if these firms are price takers and entry/exit is costless, what is the long run free entry equilibrium per-firm quantity produced by each firm in the industry? Do you have enough information to determine the number of firms who operate in such a long run free entry equilibrium? If yes, what is the number, if no, explain what else is needed?
Explanation / Answer
MC = d(C(y)/dy = 8+2y
Long run equilibrium
MC=MR=P
8+2y=135-0,5y
2.5y=127
y=50.8
price = 135-0.5*y = 135-0.5*50.8 = 109.6
but quntity cant be in integers so y= 51
p = 109.5
theres no information of the number of firms as when u plot price vs quantity curve u will understand it but u cant say how many firms present
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