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New Firm in Perfect Competition
The market demand and supply curves in a perfectly competitive industry are given by: P = 24 - Q/1,000 and P = -4 + Q/750.
Complete the following questions.
b) Calculate the equilibrium price and output in this industry.
Equilibrium price
= $
Equilibrium output
=
c) Now assume that an additional firm is considering entering. This firm has a short-run MC curve defined by MC = 7 + 0.5q, where q is the firm's output. If this firm enters the industry, what output should it produce? (Hint: It will set P = MC.)
Output
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