Hi All,

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 :

  1. 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 …??
  2. 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
  3. the difference between perfectly competitive market and purely competitive market? if there is …

Long post but your help will be much appreciated

Thanks