a, b, and c of this have already been solved (see attached). Attachment also includes original question. (d) How much is the total surplus of this economy? (e) Now suppose that the industry makes a one-time investment for $K amount of dollars to innovate in a new technology of production that allows every firm to reduce its cost of production to a 1/4 fraction of the previous cost. What is the new total surplus of the economy? Who is benefiting the most from the industry innovation?(f) Is it reasonable to assume that in the long-run $K is exactly equal to the size of the industry profits? why? We know that for a perfectly-competitive-market the individual supply curve is the marginalcost(MC) curves. MC is the derivative of the total cost(TC) function with respect to quantity(y)a. Here, the individual MC will beÖTC(y;)MC; =(;) - 25,- 2y;%3D%3DdyjAlso in a perfectly-competitive-market MC and price(P) are equal so the individual supply(ss)function will be:P = 2yjYjb. Market supply(SS) will bePY = 100y; = 100 × = 50Pc. Given the demand function, the equilibrium price(P) and Quantity(Y) will be:At equilibriumQD=Qs200 – 50P = 50P100P = 200%3DP = 2Y == 50P = 50× 2 = 100 Tech firms produce goods and services from labor and energy. The total cost in dollars to produce yamount of goods and services for each firm j is c;(y;) = y? . There are 100 identical tech firms whichall behave competitively.

We are going to calculate total surplus to solve this problem.Answer D) We are going to calculate consumer surplus and marginal cost to answer this question. Equilibrium Price =$2 Equilibrium Quantity = 100 Consumer surplus =0.5*(Maximum Price-Equilibrium Price)*(Equilibrium quantity) 0.5*(4-2)*100=100 Producer Surplus=0.5*(Equilibrium Price-Minimum Price)*(Equilibrium quantity) =0.5*(2)*100=100 Total surplus = Consumer Surplus + Producer Surplus. Total Surplus =200. Answer E) Due to technological advancement marginal cost reduced to yi/2 And P=yi/2 Market supply=100*(2P)=200P Market Demand = 200-50P 200-50P=200P Equilibrium Price =0.8 and Equilibrium Quantity=160 units Total surplus=0.5*(4-0.8)*160+0.5*(0.8)*160=320 Consumer surplus after technological advancement is 0.5*(3.2)*160=256 Consumer surplus before technological advancement is 0.5*2*100=100 So consumer gains the most due to technological advancement. Answer f) Yes because if present value of future profits is less than cost $K then it becomes inviable to invest $K in the project.