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19 June, 13:19

Each firm in a competitive market has a cost function of: Upper C equals 49 plus q squared , so its marginal cost function is MC equals 2 q. The market demand function is Upper Q equals 49 minus p. Determine the long-run equilibrium price, quantity per firm, market quantity, and number of firms. The output per firm is nothing. (round your answer to the nearest integer)

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  1. 19 June, 14:46
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    Output = 5

    Explanation:

    As per the data given in the question,

    Output per firm:

    Marginal cost = Average total cost

    MC = ATC (Since in long run each type of firm is earning zero economic profit)

    (49 + q^2) : q = 2q

    49 + q^2 = 2q^2

    49 = q^2

    q = 7

    Average total cost = (49 + 49) : 7

    = 98 : 7

    = 14

    Hence, Price = min ATC = MR = 14

    Market quantity (Q)

    = 49 - 14

    = 35

    Number of firms

    = Total quantity : Output per firm

    = 35 : 7

    = 5
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