12.5 Suppose that the demand for stilts is given by Q-1,500-50P and that the long-run total operating
Question:
12.5 Suppose that the demand for stilts is given by Q-1,500-50P and that the long-run total operating costs of each stilt-making firm in a competitive industry are given by C(q)=0.5g - 10g. Entrepreneurial talent for stilt making is scarce. The supply curve for entrepreneurs is given by where w is the annual wage paid. Qs = 0.25w, Suppose also that each stilt-making firm requires one (and only one) entrepreneur (hence, the quantity of entrepreneurs hired is equal to the number of firms). Long-run total costs for each firm are then given by C(q)=0.5g2-10g+ w.
a. What is the long-run equilibrium quantity of stilts produced? How many stilts are produced by each firm? What is the long-run equilibrium price of stilts? How many firms will there be? How many entrepreneurs will be hired, and what is their wage?
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