What will the price of the product become

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Problem: Suppose that a market currently can be described as approximating purely competitive conditions and is in long run equilibrium. The existing price for the product is $700 and total market output is 5,000. Now suppose Kevin comes up with a new technology in which economies of scale exist up to a total sales volume of 5,000 units. If the long-run total cost function associated with his new technology is given by TC = 1,000Q - 100Q2 + 5Q3 (Q's are in units of 1,000) and if the firm earns an economic profit equal to 20 percent of its (lowest possible) cost at equilibrium,

Required:

Question 1: What will the price of the product become if the industry becomes monopolized? 

Question 2: Suppose Cam wants to produce as a perfect competitor. Determine and calculate the price and output for that situation.

Reference no: EM132422693

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