1)Under perfect competition, in long-run equilibrium, P = MC = ATC.

a. True

b. False

2)Consider a demand schedule defined as P = 20 - Qd and a supply schedule defined as P = Qs, in which P is the price and Q the quantity.

Whats is the equilibrium level of output in this market? Show work.

a. 10

b. 1

c. 5

1)The given statement is a. True.

This is a true statement because the long run equilibrium in a perfectly competitive firm arise when the demand curve and marginal cost curve intersects the minimum of average total cost curve. Thus in the long run equilibrium, the price of the firms is equal to marginal cost and average total cost.

2)

The answer is a. 10.

In order to find the equilibrium level of output, we need to equate the demand function with the supply function.

Demand function P = 20 - Qd

Supply function P = Qs

Where P is the price, Qd is the quantity demanded and Qs is the quantity supplied. Let us denote the equilibrium output by Q. So, we get:

Q = 20 - Q

2Q = 20

Q = 20 / 2

Q = 10