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Questions › JNU › JNU SSS 2016 › Q52
5 marksMicroeconomics › Perfect competition › Long-run equilibrium, entry and exitModerateabout 7 min

JNU SSS 2016 Question 52: Perfect competition

In a perfectly competitive industry, the long-run demand curve is given by p=1000−qp = 1000 - qp=1000−q, the long-run average cost function for the representative firm is given by (q−4)2+40(q-4)^2 + 40(q−4)2+40. How many identical firms can exist in this industry? Explain. (qqq = quantity sold by a firm and ppp = price)

Answer and worked solution

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Plain-text version

In a perfectly competitive industry, the long-run demand curve is given by p = 1000 - q, the long-run average cost function for the representative firm is given by (q-4)² + 40. How many identical firms can exist in this industry? Explain. (q = quantity sold by a firm and p = price)

Also written as: In a perfectly competitive industry, the long-run demand curve is given by p = 1000 - q, the long-run average cost function for the representative firm is given by (q-4)^2 + 40. How many identical firms can exist in this industry? Explain. (q = quantity sold by a firm and p = price)

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.

TestStop has 14 past-paper questions on this subtopic; the nearest in year are below.

  • GATE 2021 · Q15Assuming that external economies exist, when demand increases in a perfectly competitive market, in the…
  • GATE 2021 · Q38The long-run cost function of all identical firms in a perfectly competitive industry is given by…
Practise Perfect competitionMore on Long-run equilibrium, entry and exit

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Question from the JNU SSS 2016 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.