1. (60%) Consider a competitive industry with a large number of firms, all of which have identical cost functions c(y) =

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1 60 Consider A Competitive Industry With A Large Number Of Firms All Of Which Have Identical Cost Functions C Y 1 (109.14 KiB) Viewed 16 times

1. (60%) Consider a competitive industry with a large number of firms, all of which have identical cost functions c(y) = y² +0.25 for y>0 and c(0)=0.y is the output of each firm. (A) (5%) Derive the supply function of each firm. (B) (5%) Derive the average cost function of each firm. At what output level does the average cost function has a minimum value? (C) (5%)What is the industry supply function if there are n firms in the market? (D) (10%) Draw the short-run industry supply curves on a diagram when n=2, n= 3, n = 4, n=5. (E) (10%) Suppose that the industry demand curve is : p= 3 - D, where D is the market quantity of demand. What is the equilibrium price and industry quantity if n=2, n = 3, n=4, n = 5, respectively? (F) (10%) Following part (E), what is the profit of each firm when if n=2, n = 3, n= 4, n=5, respectively? (G) (5%) Following part (E), how many firms will stay in the market in the long run? (H) (10%) Consider the demand curves gradually shifts to the right from p = 2-D to p= 4 - D. Draw the long-run supply curve of the industry within this range. (Hint: it will be a set of segments of short-run supply curves).