A firm in a competitive industry has the following short-run cost function: c(y) = y3/3 - 20y2 +310y. Assume that all firms in the industry have the same cost function. If industry demand is D(p) = 800-P, how many firms can exist profitably in equilibrium (no entry, no exit)? Hint: find optimal output for single firm and corresponding price. Then use that price to determine industry output. Then figure out how many firms are needed to generate that level of industry output. Truncate to nearest integer. Example, if result is 34.7, truncate to 34.
A firm in a competitive industry has the following short-run cost function: c(y) = y3/3 - 20y2 +310y. Assume that all firms in the industry have the same cost function. If industry demand is D(p) = 800-P, how many firms can exist profitably in equilibrium (no entry, no exit)? Hint: find optimal output for single firm and corresponding price. Then use that price to determine industry output. Then figure out how many firms are needed to generate that level of industry output. Truncate to nearest integer. Example, if result is 34.7, truncate to 34.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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