A Market Demand Function Question?

Question

Question on Market Demand?

1. The market demand function for good Q is: P = 10 – 0.5Q. The average cost of producing a unit of Q is constant and equals 2.

The question asks in perfect competition what the equilibrium price and level of q is as well as the equilibrium surplus for both consumer and producer.

I am not necessarily asking what the answers are but instead the methods to reach the answer. Any help on any of the above questions would be great! Thanks in advance!

Answer 1

In perfect competition, demand is the marginal revenue curve as well. Marginal cost is 2, since each unit produced costs 2 more. So, to find the answer, marginal revenue and marginal cost must be set equal. We know that marginal cost is 2 all the time, so we need to get P=2. This gives us a quantity of 16, and a price of 2.