Answer to Question #70055 in Economics of Enterprise for Melvin Muleya
you assume that Coca-Cola company is the representative firm & has a total cost given by TC= 125+q2+q where q is the quantity of the output that the firm produces. You further assume that the market demand for Coca-Cola products is given by the equation P= 1250.5-2Q, where Q is the entire market quantity. In addition, you are informed that the supply curve for the market is given by P=150+Q.
d) In this market, what is the long run equilibrium price and what is the long run equilibrium quantity for Coca-Cola Company to produce? Explain your answer.
e) Given the long run equilibrium price calculated in part (d) above, how many units of the coca-cola products are produced in this market?
TC = 125 + q^2 + q, demand P = 1250.5 - 2Q, supply P = 150 + Q. d) The long run equilibrium price and quantity are at point where P = MC = ATC = TC/q, so: 2q + 1 = 125/q + q +1, q = 125/q, q^2 = 125, q = 11.2 units. P = ATC = 125/11.2 + 11.2 + 1 = $23.36 e) Given the long run equilibrium price P = $23.36 calculated in part (d) above the number of the coca-cola products produced in this market is: 23.36 = 150 + Q, Q = -126.64, so no coca-cola products are produced in this market.