# Answer to Question #56027 in Economics of Enterprise for Yousef

Question #56027

The market demand for woozles is given by:

Qd = 2,400 – 20p

There is only one available technology, and it is employed by all producers—

actual and potential. It implies the following average cost function:

AC = 625q–1 + 0.25q

Currently, 20 firms serve the market.

The individual supply curve is the part of marginal cost (MC) curve after the intercection with average variable cost (AVC) curve. MC is the derivative of TC curve. MC = TC = (AC*q)= (625 + 0.25q^2)= 0.5q, so Ps = 0.5q or qs = 2p.

The industry supply curve is the sum of 20 individual firm's supply curves, so Qs = 20*2p= 40q

The short‐run competitive equilibrium price and output is in the point, where Qs = Qd, so:

40p = 2,400 - 20p,

60p=2400 > pe=$40

Qe=40*40=1600 units

Individual competitive output is q = 1,600/20 = 80 units.

TP=(P – AC)*q = (40 - (625/80 + 0.25*80))*80 = (40 - 27.8125)*80 = $975

E- Determine the long‐run competitive market price and quantity and how

many firms will operate.

Qd = 2,400 – 20p

There is only one available technology, and it is employed by all producers—

actual and potential. It implies the following average cost function:

AC = 625q–1 + 0.25q

Currently, 20 firms serve the market.

The individual supply curve is the part of marginal cost (MC) curve after the intercection with average variable cost (AVC) curve. MC is the derivative of TC curve. MC = TC = (AC*q)= (625 + 0.25q^2)= 0.5q, so Ps = 0.5q or qs = 2p.

The industry supply curve is the sum of 20 individual firm's supply curves, so Qs = 20*2p= 40q

The short‐run competitive equilibrium price and output is in the point, where Qs = Qd, so:

40p = 2,400 - 20p,

60p=2400 > pe=$40

Qe=40*40=1600 units

Individual competitive output is q = 1,600/20 = 80 units.

TP=(P – AC)*q = (40 - (625/80 + 0.25*80))*80 = (40 - 27.8125)*80 = $975

E- Determine the long‐run competitive market price and quantity and how

many firms will operate.

Expert's answer

In the long‐run competitive market price decrease, so all the firms will receive normal (zero) profit, and quantity produced will also decrease, as some firms will exit the market, so less firms will operate in the market.

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