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6 October, 18:27

The long-run supply curve for a product is horizontal with ATC = 200. Market demand is defined as P = 1,000 - 4 Q. The market is competitive and is in long-run equilibrium with 50 firms in the industry. If demand increases to P = 1,240 - 4 Q, how many firms will be in the industry at the new long-run equilibrium?

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  1. 6 October, 21:14
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    65 firms will be in the industry at the new long run equilibrium

    Explanation:

    in the long run the P=ATC

    quantity before the change is

    200 = 1000-4Q

    4Q = 800

    Q = 200

    each firm output = Q/number of firms = 200 / 50

    q = 4

    new quantity is

    200 = 1240-4Q

    4Q = 1040

    Q = 260

    number of firms=new Q/q

    =260/4 = 65

    the number of firms is 65 in the long run.
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