Perfect Competition

Question 1

Consider a competitive market with many identical firms. Each firm has total costs of TC = q2 + 4q + 36
and marginal costs of MC = 2q + 4. The market demand curve is P = 100 - QD and the short-run market price is 20.
Round answers to one decimal place.

1) What is a firm's average total cost equation?

ATC = q + + /q

2) What is a firm's break-even output level?


3) What is a firm's short-run output level and profit?

qSR= ProfitSR=

4) How many firms operate in the short-run?

# firmsSR=

5) What are the long-run equilibrium market price and output?


6) How many firms operate in the long-run? What is their individual output and profit?

# firmsLR= qLR= ProfitLR=

7) While moving from the short-run to long-run, the number of firms due to .

Score = 0