Compute the equilibrium price and quantity

Reference no: EM1369944

Assume you are given the following information about a particular industry:

QD = 6500 - 100P Market Demand
QS = 1200P Market Supply

C(q) = 722 + q2/200 Firm total cost function
MC(q) = 2q/200 Firm marginal cost function

Assume that all firms are identical and that the market is characterized by pure competition.

a. Find the equilibrium price, the equilibrium quantity, the output supplied by the firm, and the profit of each firm.
b. Would you expect to see entry into or exit from the industry in the long run? What effect will entry or exit have on market equilibrium?
c. What is the lowest price at which each firm would sell its output in the long run? Is profit positive, negative, or zero at this price?
d. What is the lowest price at which each firm would sell its output in the short run? Is profit positive, negative, or zero at this price?

Reference no: EM1369944

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