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 Q_D = 1050 - 50P,what is the equilibrium price? A)5 B)10 C)11 D)50

Question

Quizplus · Accepted Answer

In order to find the equilibrium price, we need to find the quantity at which market demand equals the sum of the quantities supplied by all 100 firms.

First, we need to find the supply curve for one firm, which is just its marginal cost curve since firms will produce where MC = P.

MC = 2q + 1 = P 
2q = P - 1 
q = (P - 1)/2

Now we can find the total quantity supplied by all 100 firms:

QS = 100q = 100(P-1)/2 = 50P - 50

Setting QS equal to market demand:

50P - 50 = 1050 - 50P 
100P = 1100 
P = 11

Therefore, the equilibrium price is $11.

Suppose There Are 100 Firms Each with a Short Run