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    Determining long run equilibrium output

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    A perfectly competitive constant cost industry contains a number of firms, each of which has the following long-run total cost function, where q is annual output:
    TC = 0.01q3 - 1.2q2 + 111q
    The market demand curve for the product is:
    Q = 5,800 - 20p
    where Q is annual industry sales.
    (a) Calculate the long-run equilibrium output of the industry.
    (b) How many firms are there in the industry in long run?

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    Solution Preview

    Please refer attached file for better clarity of algebraic expressions.


    TC = 0.01q3 - 1.2q2 + 111q
    Average Total Cost = TC/Q=0.01 q2 -1.2q+111
    We are ...

    Solution Summary

    The solution describes the steps for finding long run equilibrium output for perfectly competitive environment. It also determines number of firms working in long run.