Answer :

(a) What is the significance of p = 20?

For the price between zero to 20 no form is going to produce anything because the price is below minimum of LAC, so at the price of rupees 20 the price line is equal to minimum of LAC.

(b) At what price will the market for X be in equilibrium? State the reason for your answer.

As free entry and exit of firms is allowed the minimum of AVC is at Rs 20 which is also the equilibrium price because in long run all firms earn zero economic profit. So at any price lower than Rs 20 the firm will move out of the market.

(c) Calculate the equilibrium quantity and number of firms.

qs = 8 + 3p

= 8 + 3 (20)

= 68 units

qD = 700 – p

= 700 – 20

= 680 units

No. Of Firms = qD / qs = 10

Rate this question :

How useful is this solution?
We strive to provide quality solutions. Please rate us to serve you better.
Try our Mini CourseMaster Important Topics in 7 DaysLearn from IITians, NITians, Doctors & Academic Experts
Dedicated counsellor for each student
24X7 Doubt Resolution
Daily Report Card
Detailed Performance Evaluation
view all courses