Suppose we have many firms each with an individual supply curve of g$= ½ P). Assume that firms have a quasi-fixed cost of $5000 (that is COST = 0 if they exit but COSTS = 5000 + variable costs if they are open). Hence Cost =q² + 5000 if active. Individual demand is Qº= 100-½ P (a)_Let there be n = 100 firms and 500 consumers. What is the equilibrium market price, output per firm, and consumption per consumer given the fixed number of firms? Show and explain.< (b) Find each consumer's Consumer Surplus. Show your work.< (c) Find profits per firm. What does this imply for entry/exit decisions? Show your work. (d) Now let the number of firms change so that each firm's profits are zero. How many firms will there be in the long-run equilibrium? Show and explain why the long-run equilibrium price is $141.42. <

Suppose we have many firms each with an individual supply curve of g$= ½ P). Assume that firms have a quasi-fixed cost of $5000 (that is COST = 0 if they exit but COSTS = 5000 + variable costs if they are open). Hence Cost =q² + 5000 if active. Individual demand is Qº= 100-½ P (a)_Let there be n = 100 firms and 500 consumers. What is the equilibrium market price, output per firm, and consumption per consumer given the fixed number of firms? Show and explain.< (b) Find each consumer's Consumer Surplus. Show your work.< (c) Find profits per firm. What does this imply for entry/exit decisions? Show your work. (d) Now let the number of firms change so that each firm's profits are zero. How many firms will there be in the long-run equilibrium? Show and explain why the long-run equilibrium price is $141.42. <

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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