Consider a competitive industry with a large number of firms, all of which have identical cost functions c(y) = 2y2 + 8

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Consider a competitive industry with a large number of firms,all of which have identical cost functions c(y) = 2y2 + 8 for y> 0 and c(0) = 0. Marginal cost is M C(y) = 4y. Suppose thatinitially the demand curve for this industry is given by D(p) = 20−p (The output of a firm does not have to be an integer number, butthe number of firms does have to be an integer) (a) What is thesupply curve of an individual firm? If there are n firms in theindustry, what will be the industry supply curve? (b) What is thesmallest price at which the product can be sold? (c) What will bethe equilibrium number of firms in the industry? What will be theequilibrium price? What will be the equilibrium output of eachfirm? What will be the equilibrium output of the industry? (d) Nowsuppose that the demand curve shifts to D(p) = 21 −p. What will bethe equilibrium number of firms? (Hint: Can a new firm enter themarket and make nonnegative profits?) (e) With the new demand curveD(p) = 21 −p, what will be the equilibrium price? What will be theequilibrium output of each firm? What will be the equilibriumoutput of the industry? (f) Now suppose that the demand curveshifts to D(p) = 24 −p. What will be the equi- librium number offirms? What will be the equilibrium price? What will be theequilibrium output of each firm? What will be the equilibriumprofits of each firm?

Consider A Competitive Industry With A Large Number Of Firms All Of Which Have Identical Cost Functions C Y 2y2 8 1 (203.58 KiB) Viewed 21 times

Consider a competitive industry with a large number of firms, all of which have identical cost functions c(y) = 2y² +8 for y> 0 and c(0) = 0. Marginal cost is MC(y) = 4y. Suppose that initially the demand curve for this industry is given by D(p) = 20 - p (The output of a firm does not have to be an integer number, but the number of firms does have to be an integer) (a) What is the supply curve of an individual firm? If there are n firms in the industry, what will be the industry supply curve? (b) What is the smallest price at which the product can be sold? (c) What will be the equilibrium number of firms in the industry? equilibrium price? What will be the equilibrium output of each firm? equilibrium output of the industry? (d) Now suppose that the demand curve shifts to D(p) = 21 p. What will be the equilibrium number of firms? (Hint: Can a new firm enter the market and make nonnegative profits?) (e) With the new demand curve D(p) 21 p, what will be the equilibrium price? What will be the equilibrium output of each firm? What will be the equilibrium output of the industry? (f) Now suppose that the demand curve shifts to D(p) = 24 - p. What will be the equi- librium number of firms? What will be the equilibrium price? What will be the equilibrium output of each firm? What will be the equilibrium profits of each firm? = What will be the What will be the