Show that the long-run equilibrium number of firms is indeterminate when all firms in the industry share the same constant returns-to-scale technology and face the same factor prices.
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4.5 Show that the long-run equilibrium number of firms is indeterminate when all firms in the industry
share the same constant returns-to-scale technology and face the same factor prices.
4.7 Technology for producing q gives rise to the cost function c(q) = aq + bg. The market demand for
qisp =a - Bq.
(a) If a>0, if b < 0, and if there are J firms in the industry, what is the short-run
market price
b) Ifa> 0 and b <0, what is the long-run equilibrium market price and number of firms? Explain.
() Ifa>0and b > 0, what is the long-un equilibrium market price and number of firms? Explain.
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- The figure deplcts the demand curve for Beautiful Cars, and the marginal cost and Isoprofit curves of the car manufacturer. The quantity and price at polnt E are (Q*. P*) - (30, 5,500). Suppose now that the firm Increases the price to 5,550 and chooses the corresponding level of output from the demand function at the new price. Based on this Information, whlch of the following Is correct? 8,000 Demand curve 100 Quantity of cars, O O The firm will sell 30 cars at the higher price. O The firm's profit remains the same. O The quantity of cars produced reduced. O Tho firm's profit is now incroasod Price, Marginal cost ($)Suppose that the market demand for a product is given by ( A > 0 and B > 0). Suppose QABP=-also that in a competitive industry the typical firm’s cost function is given by (k > 2()Cqkaqbq=++0, a > 0 and b > 0).(a) Calculate the long-run equilibrium market price and the output for the typical firm. (b) Calculate the equilibrium number of firms in the market.(c) Describe how changes in the demand parameters A and B affect the equilibrium number of firms in this market. Explain your results intuitively.Short-run supply and long-run equilibrium Consiber the competitive market for rhodium. Assume that no matter how many firms operate in the induatry, every firm is identical and faces the same marpinal cost (MC), averapt total cost (ATC), and average variable cost (AVC ) curves plotted in the following praph. The following graph plots the market demand curve for thodium. If there were 10 firms in this market, the short-run equilibrium price of rhodium would be per pound. At that price, firms in this industry would. Therefore, in the long run, firms would the rhodium market. Because you know that competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be per pound. From the graph, you can see that this means there will be firms operating in the rhodium industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. True False
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