Purchase Solution

What is the equilibrium price of a widget?

Not what you're looking for?

Ask Custom Question

Market Structure Problem #1: The Widget Industry:

The Widget industry is perfectly competitive. The lowest point on the long-run average cost curve of each of the identical widget producers is $4 and this minimum point occurs at an output of 1,000 widgets per month. When the optimal scale of a firm's plant is operated to produce 1,150 widgets per month, the short-run average cost of each firm is $5. The market demand curve for widgets is:

Qd= 140,000 -10,000P where Qd is the quantity of widgets demanded per month and P is the price of a widget.
The market supply curve is:

Qs= 80,000 + 5,000P, where Qs is the quantity of widgets supplied per month and P is the price of a widget.

1) What is the equilibrium price of a widget? Is this the long-run equilibrium price, and if so, how did you know this?

Attachments
Purchase this Solution

Solution Preview

1) What is the equilibrium price of a widget? Is this the long-run equilibrium price, and if so, how did you know this?

The condition for ...

Purchase this Solution


Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.