1. The market for study desks is characterized by perfect competition. Firms and consumers are price takers and in the long run there is free entry and exit of firms in this industry. All firms are identical in terms of their technological capabilities. The cost function as given below for a representative firm can be assumed to be the cost function faced by each firm in the industry. The total cost and marginal cost functions for the representative firm are given by the following equations:

TC = 2q_s² + 5q_s + 50

MC = 4q_s + 5

Suppose that the market demand is given by:

P_D = 1025 - 2Q_D

Note: Q represents market values and q represents firm values. The two are different.

a) Determine the equation for average total cost for the firm.

b) What is the long-run equilibrium price in this market? (Hint: since the market supply is unknown at this point, it's better not to think of trying to solve this problem using demand and supply equations. Instead, you should think about this problem from the perspective for a firm. Specifically, a long run equilibrium occurs where ATC = MC = Price)

c) What is the long-run output of each representative firm in this industry?

d) When this industry is in long-run equilibrium, how many firms are in the industry? (Hint: firms are identically sized).

e) In the short run will a representative firm in this industry earn negative economic profits, positive economic profits, or zero economic profits? (Hint: You can solve this without calculation.)

f) In the long run will a representative firm in this industry earn negative economic profits, positive economic profits, or zero economic profits? (Hint: again, no calculation required)

l. The market for study desks is characterized by perfect competition. Firms and consumers are price takers and in the long run there is 'ee entry and exit ofrms in this industry. All rms are identical in terms of their technological capabilities. The cost rnction as given below for a representative firm can he assumed to be the cost function faced by each rm. in the industry. The total cost and marginal cost functions for the representative rm are given by the following equations: TC = 21:19.1 + Sq; + 51'.) MC = 4:]; + 5 Suppose that the market demand is given by: PD = 1025 ZQD Note: Q represents market values and q represents rm values. The two are di'erent. a) Determine the equation for average total cost ar the rm. b) 1|What: is the longrun equilibrium price in this market? (Hint: since the market supply is unknown at this point, it's better not to thin]: of trying to solve this problem using demand and supply equations. Instead, you should think about this problem om the perspective for a rm. Specicalty, a long run equilibrium occurs where ATC = MC = Price) c) 1What is the longrun output of each representative rm in this industry? d) 1i''ben this industry is in longrun equilibrium, how many rms are in the industry? (Hint: rms are identically sized). e) [n the short run will a representative rm in this industry earn negative economic prots, positive economic prots, or zero economic prots? (Hint: You can solve this without caiculation.) i] [n the long run will a representative rm in this industry earn negative economic prots, positive economic prots, or zero economic prots? (Hint: again, no calculation required)