--%>
Assignment Help - homework help

Problem on long run competitive equilibrium

The technology is such that LAC is minimized at firm’s output equivalent to 10 and minimum LAC is Rs. 15. Assume that the demand schedule for the product is given as shown:

2207_table price.jpg

(i) Determine total quantity sold in market and how many firms will operate in long run competitive equilibrium?

(ii) Assume that because of technological development the LAC curve shifts down in such a way that the minimum average cost is equivalent to Rs. 12 and it takes place at output level 8. Determine how many firms will now operate in the market in long run?

E

Expert

Verified

Answer:

Long run equilibrium takes place if: AC = AR

Initially, AC is given as = Rs. 15

(At equilibrium condition, Quantity demanded = Quantity sold)

If P = AC = Rs. 15: Quantity Sold = 1200 units

If each firm is producing 10 units. Then no. of firms = 1200/10=120

If AC = Rs. 12

Then price (AR) = AC = Rs. 12, Quantity Sold= 1440 units.

If each firm is generating 8 units, Then no. of firms =1440/8 = 180

(i) Before change in technology: Quantity Sold = 1200 units and No. of firms = 120

(ii) After change in technology: Quantity Sold = 1440 units and No. of firms = 180

   Related Questions in Microeconomics

  • Q : Price elasticity of demand coefficient

    In this demonstrated figure, there the price elasticity of demand coefficient is: (1) one at the midpoint. (2) greater than one in range a. (3) less than one in range b. (4) falling along with movements down along the demand curve. (5) All of the abov

    		•
  • Q : Prices and outputs in short run All

    All output markets which are less than purely competitive are characterized through: (1) domination of the market by some large firms. (2) individual firms that are very small to affect their prices. (3) freedom of entry and exit in the long run. (4)

    		•
  • Q : Production function Describe three

    Describe three properties of a variable proportions production function that make sure that it allow profit maximization and cost minimization.

    		•
  • Q : Price elasticity of demands for moving

    Moving from point d to point e beside demand curve D, the price elasticity of demands of DVDs of video games at equal: (a) 0.8. (b) one. (c) 1.10. (d) 1.25. (e) 2.50

    Q : Unemployment among skilled workers

    Rises in the legal minimum wage rate have not been blamed for rising: (i) Unemployment among the teenagers. (ii) Racial discrimination in the employment. (iii) Unemployment among trained workers who have lost their jobs since of competition from the cheaper imports. (

    		•
  • Q : Problem on Long-Run Adjustments Since

    Since longer time intervals are considered, the quantities demanded for most goods become __________ to any modification in price. (1) Directly related. (2) Less responsive. (3) Less enamored. (4) Indifferent. (5) More responsive.Find out the right answer from t

    		•
  • Q : Effects of technology advances in

    The market prices for big plasma screen TVs are most probable to fall as an effect of: (1) Strikes by unionized workers in the electronics factories in Korea, Japan and China. (2) Seller expectations of Scarcities of plasma screen TVs. (3) Best Buy running competitors

    		•
  • Q : Buying and selling cost in monetary

    Additionally to monetary prices, there the costs of buying and selling comprise: (w) wage payments. (x) monopoly profits. (y) transaction costs. (z) social benefits. How can I solve my economics pr

    		•
  • Q : Normative Criteria for Income

    The most compatible along with capitalism of the normative criteria for income distribution, which is the: (1) contribution standard. (2) gold standard. (3) needs standard. (4) balanced standard. (5) equality standard.

    Q : Pure competition or monopoly with

    Compared along with pure competition or monopoly, not perfect competition is: (w) far more common in Europe than in the United States. (x) much more common in markets during the world. (y) much less common in advanced nations than in underdeveloped na

    		•