Calculating optimal output and market price
Not what you're looking for?
Propylene is used to make plastic. The propylene industry is perfectly competitive and each producer has a long run total cost function given by
LTC= 1/3 Q^3 -6Q^(2 )+40Q
Where Q denotes the output of the individual firm.
The market demand for propylene is
X =2200 -100P
Where X and P denote the market output and price respectively.
1. Calculate the optimal output produced by each firm at the long run competitive equilibrium (LRCE).
2. Calculate the market price and market output at the LRCE.
3. Calculate the number of firms at the LRCE.
Suppose the demand curve shifts to
X =A -100P
Where A is a positive number.
Calculate how large A would have to be so that in the new LRCE, the number of firms is twice what it was in the initial equilibrium.
Purchase this Solution
Solution Summary
Solution describes the steps to calculate optimal output and market price. It also calculates number of firms present in the market in the given scenario.
Solution Preview
1. Calculate the optimal output produced by each firm at the long run competitive equilibrium (LRCE).
At LRCE, long run marginal Cost is equal to long run average cost.
Given, LTC= 1/3 Q^3 -6Q^(2 )+40Q
Long run marginal cost (LRMC) is given by
LRMC=d(LTC)/dQ=Q^2-12Q+40
Long run average cost (LRAC) is given by
LRAC=LTC/Q=1/3 ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
- "Thank you"
- "Really great step by step solution"
- "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
- "Thanks Again! This is totally a great service!"
- "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
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.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.