In a perfectly competitive market, suppose the market demand curve is given by , where is the market price, is the average wealth of the consumers in the market, and is the industry output. The total cost function for a representative firm is given by , where is the output of a firm. If , then the total number of firms in this industry in the long-run will be ______ (in integer).
GATE 2024 Question 62: Perfect competition
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Plain-text version
In a perfectly competitive market, suppose the market demand curve is given by P=10+W-Q, where P is the market price, W is the average wealth of the consumers in the market, and Q is the industry output. The total cost function for a representative firm is given by C(q)=q³-2q²+5q, where q is the output of a firm. If W=80, then the total number of firms in this industry in the long-run will be (in integer).
Also written as: In a perfectly competitive market, suppose the market demand curve is given by P=10+W-Q, where P is the market price, W is the average wealth of the consumers in the market, and Q is the industry output. The total cost function for a representative firm is given by C(q)=q^3-2q^2+5q, where q is the output of a firm. If W=80, then the total number of firms in this industry in the long-run will be (in integer).
Perfect competition has come up 115 times in 7 exams since 2006.
What this question tests
This question is on Long-run equilibrium, entry and exit, part of Perfect competition in Microeconomics.
Why free entry drives profit to zero in the long run, and what that implies for the number of firms and industry supply.
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