2. Identical firms are in a monopolistic competition market. Entering the market generates a sunk cost of 128. Their marginal cost of production is c= 10. The market demand is Q = 180 – 2P. (a) Find how many firms we will have in the long run. (b) What is the socially optimal number of firms?
2. Identical firms are in a monopolistic competition market. Entering the market generates a sunk cost of 128. Their marginal cost of production is c= 10. The market demand is Q = 180 – 2P. (a) Find how many firms we will have in the long run. (b) What is the socially optimal number of firms?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Please answer part a,b,c
![2. Identical firms are in a monopolistic competition market. Entering the market generates a sunk cost
of 128. Their marginal cost of production is e= 10. The market demand is Q = 180 – 2P.
(a) Find how many firms we will have in the long run.
(b) What is the socially optimal number of firms?
(c) For which values of the entry cost would the socially optimal number of firm be larger than the
long-run equilibrium number of firms?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F01f833ba-4ead-414f-8246-3174479edecc%2Fb71b6bf0-2b5a-4ff9-b725-b9798a79c4f1%2Fsqgy0c_processed.jpeg&w=3840&q=75)
Transcribed Image Text:2. Identical firms are in a monopolistic competition market. Entering the market generates a sunk cost
of 128. Their marginal cost of production is e= 10. The market demand is Q = 180 – 2P.
(a) Find how many firms we will have in the long run.
(b) What is the socially optimal number of firms?
(c) For which values of the entry cost would the socially optimal number of firm be larger than the
long-run equilibrium number of firms?
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