Suppose you are given the following information about a particular industry: Q^D = 6,500 - 100P:...
Question:
Suppose you are given the following information about a particular industry:
{eq}Q^D = 6,500 - 100P {/eq} : Market demand.
{eq}Q^S = 1,200P {/eq} : Market supply.
{eq}C(q) = 722 + \frac{q^2}{200} {/eq} : Firm's total cost function.
{eq}MC(q) = \frac{2q}{200} {/eq} : Firm's marginal cost function.
Assume that all firms are identical, and that the market is competitive.
a) Find the equilibrium market price and quantity, the output supplied by the firm, and firm's profits.
b) Would you expect to see entry into or exit from the industry in the long-run? Explain. What effect will entry or exit have on market equilibrium?
c) What is the lowest price at which each firm would sell its output in the long run? Is profit positive, negative, or zero at this price? Explain.
d) What is the lowest price at which each firm would sell its output in the short run? Is profit positive, negative, or zero at this price? Explain.
Competitive market.
Competitive market is a market structure characterized by many buyers and sellers with no barriers for entry or exit to and from the market. Firms continues to enter the market until the economic profit equals to zero. If firms are making economic losses, the firms will exit the market.
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View this answera) Find the equilibrium market price and quantity, the output supplied by the firm, and firm's profits.
{eq}Q_d=6500-100P\\Q_s=1200P {/eq}
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Competitive Market: Definition, Characteristics & Examples
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Chapter 3 / Lesson 19
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Learn the competitive market definition and explore characteristics of a competitive market. Study competitive market examples that illustrate these characteristics.
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