A perfectly competitive market within the long period:
Data
firm A: ATC = y2 4y + 12 and MC = 3y2 – 8y + 12
firm B: ATC = y2 4y + 10 and MC = 3y2 – 8y + 10
firm C: ATC = y2 4y + 8 and MC = 3y2 – 8y + 8
market demand curve: ym = 200 20py
Questions
a. Suppose that the minimum ATC for each of the firms takes place when they generate two units of output. If the auctioneer calls out a market price of $6.00 that firm will ought to leave the market and why.
b. Find out the long period equilibrium market price, equilibrium market output, and the number of firms into the market.
c. If the market demand curve shifted towards the right and becomes 300 – 15py what would be the new equilibrium market price & market output?
d. Do the results of (b) and (c) support a supply and demand determination of the market price? Describe.