9781118041581

Summary 315

numerical values for the Price, # Firms, and QFcells; all other cells

should be linked by formulas to these three cells.)

b. What equilibrium price will prevail in the short run? (Hint:Use the

spreadsheet’s optimizer and specify cell F8, the difference between

demand and supply, as the target cell. However, instead of maximizing

this cell, instruct the optimizer to set it equal to zero. In addition,

include the constraint that P MC in cell F14 must equal zero.)

AB C D E F G H

1

2 Equilibrium in a Perfectly

3 Competitive Market

4

5 The Industry

6 Price # Firms Supply Demand D  S Tot. Profit

7

8 10 24 192 200 8 552

9

10

11 The Typical Firm

12 QF MC Cost AC P MC Firm Profit

13

14 8 12 57 7.13  223

15

16

17 SR: (1) D S 0 and (2) P MC; Adjust: P & QF

18 LR: (1) and (2) and (3) P AC; Adjust: P & QF& # Firms

19

c. What equilibrium price will prevail in the long run? (Hint:Include

cell C8, the number of firms, as an adjustable cell, in addition to cells

B8 and B14, and add the constraint that total profit in cell G8 must

equal zero.)

S2. The industry demand curve in a perfectly competitive market is given by

the equation P  160 2Q, and the supply curve is given by the

equation P  40 Q. The upward-sloping supply curve represents the

increasing marginal cost of expanding industryoutput. The total industry

cost of producing Q units of output is C  800 40Q  .5Q^2. (Note that

taking the derivative of this equation produces the preceding industry

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