What is the minimum efficient scale in this industry

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The typical firm in a perfectly competitive market manufacturing an appliance part has long-run total cost of TC = 6q2 + 2400 and marginal cost of MC = 12q, where q is the quantity produced per firm per year and costs are measured in dollars. Market demand is given by Q = 50,000 - 100P, where Q is market quantity sold per year.

a. What is the minimum efficient scale in this industry? Explain your answer and illustrate with a graph.

b. What is the long-run equilibrium price in this market? Explain intuitively, in your own words, why this is the long-run equilibrium. What is the long-run market equilibrium quantity? (No graph is required.)

Reference no: EM13100626

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