00:01
So here we are told about a market, right? we are told, first of all, that there's a demand curve, which is 1280 minus 2p.
00:08
Great, demand curve.
00:09
We're also given a long run cost curve, right? the costs at the individual quantity are equal to 4q squared plus 100 q plus 100, right? and what we need is that there are 80 firms, right? n is equal to 80.
00:31
And i guess this is the maximum number of firms, right? so we want to first of all derive the supply curve.
00:37
Great, right? remember, the supply curve comes from marginal cost above average variable cost, right? that's where firms are willing to supply.
00:51
If price is lower than average variable cost, firms are not going to supply.
00:58
So they are only willing to supply where marginal cost is greater, or where, again, price is equal to marginal cost, which is the competitive thing, is greater than average variable cost.
01:10
So first of all, marginal cost here is 8q plus 100 for the firm.
01:18
That's great.
01:18
Let's see if we can sketch this, right? and so variable cost is equal to 4 q squared plus 100 q, right? so average variable cost is equal to 4q plus 100.
01:37
So if i plot this, right, in terms of q, i get my average variable cost starting at 100, looking like this.
01:48
I get my marginal cost also looking at like this.
01:51
So here there's no shutdown problem.
01:53
Right? there's no chance of the firm ever shutting down unless the price is below 100, right? that's the, this is the shutdown point, right? so firms are not going to will, are not going to be willing to supply anything below that level in the short run, right? in the long run, shutdown becomes a little bit more complicated, but we won't worry about it.
02:19
So we can also put our demand curve here, right? our demand curve is 12.
02:23
80 minus 2p but remember that this marginal cost firm here is for all firms not for one firm so when we put demand here we want to think about this point but to think about that point we need to say right this is for each right so we need to convert this to for all firms assuming that there are 80 firms right and the key is when we are adding individual supply curves, you can only add quantities, right? it makes sense for you say, i produced two, you produced three, so together we produced five, but it doesn't make any sense to say that i produce at 20, you produce at $30, together we produce at $50.
03:15
That's garbage, right? it doesn't, prices don't add the way that quantities do...