Assignment Help - homework help

Problem on long run competitive equilibrium

The technology is such that LAC is minimized at firm’s output equivalent to 10 and minimum LAC is Rs. 15. Assume that the demand schedule for the product is given as shown:

2207_table price.jpg

(i) Determine total quantity sold in market and how many firms will operate in long run competitive equilibrium?

(ii) Assume that because of technological development the LAC curve shifts down in such a way that the minimum average cost is equivalent to Rs. 12 and it takes place at output level 8. Determine how many firms will now operate in the market in long run?

E

Expert

Verified

Answer:

Long run equilibrium takes place if: AC = AR

Initially, AC is given as = Rs. 15

(At equilibrium condition, Quantity demanded = Quantity sold)

If P = AC = Rs. 15: Quantity Sold = 1200 units

If each firm is producing 10 units. Then no. of firms = 1200/10=120

If AC = Rs. 12

Then price (AR) = AC = Rs. 12, Quantity Sold= 1440 units.

If each firm is generating 8 units, Then no. of firms =1440/8 = 180

(i) Before change in technology: Quantity Sold = 1200 units and No. of firms = 120

(ii) After change in technology: Quantity Sold = 1440 units and No. of firms = 180

   Related Questions in Microeconomics

  • Q : Recommendation of data on poverty Data

    Data on poverty into the United States recommend that the: (w) sex of the head of the family is unrelated to the poverty rate. (x) race of the head of the family is unrelated to the poverty rate. (y) families headed by African-American or Hispanic wom

    		•
  • Q : Facing a demand curve by purely

    A purely competitive firm faces a demand curve which is: (1) perfectly inelastic. (2) upward sloping. (3) perfectly elastic. (4) a vertical line. (5) downward sloping. Can anybody suggest me the proper explanation

    		•
  • Q : Problem concerning Exploitation I have

    I have a problem in economics on Problem concerning Exploitation. Please help me in the given question. Whenever resource suppliers are salaried less than the values of their marginal products [or VMPs], then they are stated to be: (i) Monopsonistic.

    		•
  • Q : Profit maximization-output level in

    Profit maximization needs a purely competitive firm to manufacture at an output level where: (i) marginal revenue > marginal cost. (ii) marginal cost equals the competitive price. (iii) marginal cost is falling. (iv) marginal reven

    		•
  • Q : What is Imperfect data Imperfect data :

    Imperfect data: Most studies start with imperfect data. Few datasets involve the entire population of interest. Typically, the data has been gathered by others for specific purposes, and as such may have built in b

    		•
  • Q : Define progressive in taxes as

    Line T0 depicts a tax system which is: (1) progressive. (2) recessive. (3) proportional. (4) biased. (5) regressive. 1577_</span></p> </div> <!-- /comment-box --> </li> </td> </tr><tr> <td> <li> <div class=

    Q : Tax cutting affect the economy How does

    How does tax cuts affect the economy?

    		•
  • Q : Movement of Supply Curve towards up and

    The rise in the price of Pepsi will effect a: (1) Shift of the supply curve of Coke to left. (2) Shift of the supply curve of Pepsi to right. (3) Movement downwards all along the supply curve of Coke. (4) Movement up and to right all along the supply curve of Pepsi.

    		•
  • Q : Influence of war in prices Assume that

    Assume that the War in Iraq start to engulf other Middle-Eastern countries in hostilities. The least probable outcome of gasoline prices therefore increasing to, state, $10 per gallon in the United States, would be that: (i) Hummer sales would fall as a percentage of

    		•
  • Q : Who made decisions Economists suppose

    Economists suppose that nearly all decisions are made by: (i) At the margin. (ii) On the average. (iii) Based on totals. (iv) All of the above. Please someone suggest me the right answer.

    		•
Home | Company Overview | Services | Discover Q&A | Sitemap | Contact Us | T & C | Refund Policy | Copyright Policy | Blog | Q&A | Directory

©TutorsGlobe All rights reserved 2022-2023.