00:01
So here we're told about a perfectly competitive firm.
00:03
We have a total cost of 200q plus q squared plus 225, right? now we are also told that the price, which is equal to the marginal revenue in competition, is 240.
00:16
So in a we want to set marginal cost equals to marginal revenue, and marginal cost is the derivative of total cost with respect to q, which is going to be 200 plus 2q.
00:29
Sorry, a little bit of lag there.
00:30
When i do this i get 200 plus 2q is equal to 240.
00:36
This gives me 2q is equal to 40.
00:39
Q is equal to 20.
00:41
That would be the profit maximizing level of output.
00:45
The key is for b, for long run, we know that the price has to be equal to the minimum of the average total cost, which generates zero profit, right? if there are profits to be made, then firms are entering the industry and you're not in a long run equilibrium.
01:03
So what we need to do is to check average total cost, right? average total cost here would be 200 plus q plus 225 over q...