Suppose there are 100 firms each with a short run total cost of STC = q2 + q + 10, so that marginal cost is MC = 2q +1. If market demand is given by QD = 1050 - 50P, what is the equilibrium price?Question 5Select one:a.50.b.10.c.5.d.11.
Question
Suppose there are 100 firms each with a short run total cost of STC = q2 + q + 10, so that marginal cost is MC = 2q +1. If market demand is given by QD = 1050 - 50P, what is the equilibrium price?Question 5Select one:a.50.b.10.c.5.d.11.
Solution
To find the equilibrium price, we first need to find the supply curve.
Given the marginal cost (MC) equation MC = 2q + 1, we can set this equal to price (P) to find the supply curve, since in perfect competition, P = MC.
So, P = 2q + 1.
Since there are 100 firms, the total quantity supplied (QS) in the market is 100q.
So, QS = 100q = 50P - 100 (dividing both sides by 2 to isolate P).
The demand curve is given by QD = 1050 - 50P.
In equilibrium, QS = QD.
So, 50P - 100 = 1050 - 50P.
Solving this equation for P gives:
100P = 1150, P = 11.5.
However, this is not one of the options given. There may be a mistake in the problem or in the options provided.
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