Every firm in the widget industry has fixed costs of $6 and faces the following marginal cost curve:

Quantity Marginal Cost

1 ..........$2

2 .......... 4

3 .......... 6

4 .......... 8

5 ..........10

a. Suppose the price of widgets is $10. How many widgets does each firm produce? How much profit does the firm earn? Is the industry in long-run equilibrium? How do you know?

b. In the long run, will there be entry or exit from this industry? What will be the price of widgets in the long run? How many widgets will each firm produce?