A large number of firms enter the Swedish market for the game Padel. For simplicity assume that they all act as price takers and let the cost function for each of them be given by C(q)=1000+0.4*q² where q is the number of customers served. a) In the long run free entry should drive profit to zero. At this point p=MC=ATC. Intuitively why is this the case? b) The condition in c) implies that in a free entry equilibrium with firms that have the same cost function each firm's production will be given by the lowest point in the average total cost curve. How much does each firm produce in the free entry equilibrium? What is price in this equilibrium? (Hint: You can either differentiate the expression for average cost to determine its minimum or you can look for the minimum point using your graph in b). c) Assume that overall demand is given by Q-1200-2*P. How many firms will there be in equilibrium?
A large number of firms enter the Swedish market for the game Padel. For simplicity assume that they all act as
a) In the long run free entry should drive profit to zero. At this point p=MC=ATC. Intuitively why is this the case?
b) The condition in c) implies that in a free entry equilibrium with firms that have the same cost function each firm's production will be given by the lowest point in the
c) Assume that overall
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