Consider the following setup for a perfectly competitive market: Suppose that for the firm, TC=625+Q^2 and MC=2Q, and for the industry, demand is given by P=100-Q and supply is given by S=Q. However, suppose now that there is an increase in demand, so that demand is given by and for the industry, demand is given by P=500-Q. Will this market outcome be sustainable? That is, do you expect firms to leave the market, enter the market, or neither? a. Firms will enter the market. b. Firms will leave the market. c. Firms will neither enter nor leave the market. d. There could be barriers to entry.

Consider the following setup for a perfectly competitive market: Suppose that for the firm, TC=625+Q^2 and MC=2Q, and for the industry, demand is given by P=100-Q and supply is given by S=Q. However, suppose now that there is an increase in demand, so that demand is given by and for the industry, demand is given by P=500-Q. Will this market outcome be sustainable? That is, do you expect firms to leave the market, enter the market, or neither? a. Firms will enter the market. b. Firms will leave the market. c. Firms will neither enter nor leave the market. d. There could be barriers to entry.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.7P

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