competitive market
A
firm sells its product in a perfectly competitive market where other firms
charge a price of $80 per unit. The firm’s total costs are C(Q)
= 70 + 8Q + 2Q2.
a. How much output should the firm produce in
the short run?
18 units
b. What price should the firm charge in the
short run?
$80
c. What are the firm’s short-run profits?
$
d. What adjustments should be anticipated in the
long run?
| Entry will occur until economic profits shrink to zero. | |
| No firms will enter or exit at these profits. | |
| Exit will occur since these economic profits are too low. |
