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TC(q)= 4q^2 + 8. The market demand function is Q(p) = 800 - 15p, and there are 40 identical firms in the market. A. What is a firm's short-run supply function? Will it ever decide to shut down? Explain. And what is the market supply function?   B. Suppose there are 40 identical firms in the market. What is the equilibrium price, p*? What is the equilibrium quantity supplied by each firm, q*? What is each firm's equilibrium profit? Will there be more entry into the market? Why?   C. Repeat b, but with 80 firms this time. Label your results with superscript **

TC(q)= 4q^2 + 8. The market demand function is Q(p) = 800 - 15p, and there are 40 identical firms in the market. A. What is a firm's short-run supply function? Will it ever decide to shut down? Explain. And what is the market supply function?   B. Suppose there are 40 identical firms in the market. What is the equilibrium price, p*? What is the equilibrium quantity supplied by each firm, q*? What is each firm's equilibrium profit? Will there be more entry into the market? Why?   C. Repeat b, but with 80 firms this time. Label your results with superscript **

Exploring Economics
Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter12: Firms In Perfectly Competitive Markets
Section: Chapter Questions
Problem 9P
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      E3
Consider a perfectly competitive firm in a short run scenario. Its total cost function is
TC(q)= 4q^2 + 8. The market demand function is Q(p) = 800 - 15p, and there are 40 identical
firms in the market.
A.
What is a firm's short-run supply function? Will it ever decide to shut down? Explain.
And what is the market supply function?
 
B. Suppose there are 40 identical firms in the market. What is the equilibrium price, p*? What
is the equilibrium quantity supplied by each firm, q*? What is each firm's equilibrium
profit? Will there be more entry into the market? Why?
 
C.
Repeat b, but with 80 firms this time. Label your results with superscript **
 
D.
Repeat part b, but with 280 identical firms now. Label your results by superscript ***.
 
Part E.
 
Compare your results in parts b - d. Explain why the increase in the number of
firms affects the results in that manner. What should happen to profit eventually as the
number of firms keeps increasing? And when this happens to profit, will there be any entry into the market?
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