Consider an industry with two possible long-run cost functions. There are no quasi-fixed costs in this industry: MC₁=y C₁ = (y^2)/2 Demand is given by: P =25-x/2 C₂-Sy MC₂ 5 a. What are the supply functions for firms of both types? b. Find the equilibrium price, quantity, and number of firms of each type in a competitive long-run equilibrium. Is there a long-run equilibrium? c. Suppose the government intervened and limited the number of type 1 firms to be N = 5. What is the market supply function? d. Find the equilibrium price and quantity in the market now. What is the aggregate quantity produced by type 1 firms? What is the aggregate quantity produced by type 2 firms?

Consider an industry with two possible long-run cost functions. There are no quasi-fixed costs in this industry: MC₁=y C₁ = (y^2)/2 Demand is given by: P =25-x/2 C₂-Sy MC₂ 5 a. What are the supply functions for firms of both types? b. Find the equilibrium price, quantity, and number of firms of each type in a competitive long-run equilibrium. Is there a long-run equilibrium? c. Suppose the government intervened and limited the number of type 1 firms to be N = 5. What is the market supply function? d. Find the equilibrium price and quantity in the market now. What is the aggregate quantity produced by type 1 firms? What is the aggregate quantity produced by type 2 firms?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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