A perfectly competitive industry that produces wireless headphones consists of many firms that can produce 1,000 pairs of headphones per day at a minimal average cost $100 per pair. Each firm must also pay marketing fees for its production, and the marketing fee m per each pair of headphones is an increasing function of the total industry output Q: m = 0.0005Q. The demand for headphones is given by Q = 100, 000 − 500p, where p is the price of a pair of wireless headphones. a) Let the headphones industry be in a long-run equilibrium. What is the equilibrium price of a pair of headphones? How many pairs of wireless headphones are produced? How many firms are there in the industry? What is the marketing fee per pair of headphones? b) Suppose that the demand for wireless headphones increases to Q = 125, 000 − 500p. In a new long-run equilibrium, what is the equilibrium price of a pair of headphones? How many pairs of wireless headphones are produced? How many firms are there in the industry? What is the marketing fee per pair of headphones? c) Calculate the change in the producers’ surplus between the situations described in (a) and (b).
A
a) Let the headphones industry be in a long-run equilibrium. What is the
b) Suppose that the demand for wireless headphones increases to Q = 125, 000 − 500p. In a new long-run equilibrium, what is the equilibrium price of a pair of headphones? How many pairs of wireless headphones are produced? How many firms are there in the industry? What is the marketing fee per pair of headphones?
c) Calculate the change in the
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