Reading 15 - Firm and market structures - Practice Problem 5
I have the following question that I would like to understand :
The demand schedule in a perfectly competitive market is given by P = 93 – 1.5Q (for Q ≤ 62) and the long-run cost structure of each company is:
Total cost: 256 + 2Q + 4Q2
Average cost: 256/Q + 2 + 4Q
Marginal cost: 2 + 8Q
New companies will enter the market at any price greater than ? : 66
My questions are :
- In the lrun for a perfectly competitive market P=MR=MC=AC, why can’t we in the above question equate P which is = MR to MC? AC = MC will work also, easier to calculate …??
- For new companies to enter the Market , P > AC , the answer would be the same if we plug in 8 in AC and MC. But why use MC ? knowing that new equilibrium Pt, (P=MR=MC) > AC
- the difference between perfectly competitive market and purely competitive market? if there is …
Long post but your help will be much appreciated
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