1.Suppose each firm's long run average cost curve, for positive levels of output, is given by AC = 0.1 + 0.05Q + (5/Q). The marginal cost curve is given by MC = 0.1 + 0.1Q.

a)Determine the minimum efficient scale and the minimum average cost.

b)Suppose you have many identical firms in a long run competitive equilibrium. Demand is P = 13.1 0.04Q. What is the market quantity? How many firms are there?

c)Suppose demand increases to P= 15.10.04Q. Supposing that increases in industry output do not affect input prices, what is the new long-run competitive equilibrium, and how many new firms will there be?

d)Illustrate your new and old competitive equilibria on a graph with the demand curves and the long run supply curve.