Reference no: EM132156938

A firm in a perfectly competitive constant cost industry has total costs in the short run given by:

TC = 2.5q2 + 5q + 40 q ≥ 1

where q is output per day and TC is the total cost per day in dollars. The firm has fixed costs of $30 (already included in the TC equation above). The TC equation generates minimum average costs of $25 (per unit) at q = 4. You are also told that this size firm generates minimum long run average costs (that is, minimum LRAC occurs at q = 4, with min LRAC = $25). Questions 17 through 22 concern this firm and this industry.

In the short run there are 200 firms, including this one, in the industry, all with the same cost curves described above. Suppose that the demand curve facing the industry is given by the equation P = 125 - .075Q where P is the price per unit and Q is the number of units demanded per day. 

• What is the equilibrium price in the short run?
• What is the profit earned by an individual firm per day in the short run?
• Suppose now that we move into the long run (you are reminded that information on long run costs was given at the beginning of the problem). 
• What is the total output of the industry per day in the long run (to the nearest integer)?
• Suppose that we are still in the long run. What is the number of firms in the industry, rounding to the nearest integer?