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Math Help - Economics help needed

  1. #1
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    Aug 2008
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    Economics help needed

    I have been scratching my head about this problem for a while, i dont know what to do.

    Consider a price taking firm with cost function C(q) = 50 + 0.5q + 0.08q^2

    a.) if the current market price is 8.50 then show that this industry is not in long run equilibrium
    b) Find the price associated with long run equilibrium

    thanks
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  2. #2
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    Joined
    Sep 2008
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    In long run equilibrium, the profit of the firm = 0

    So if you computer profit = revenue - cost, you will find that profit >0, which proves that the firm is not in long run equilibrium.

    To find the long run equilibrium price, set profit = 0 and find the x that solves the equation.
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