2) PERFECTLY COMPETITIVE MARKET Suppose the wheat growing industry in Canada is perfectly competitive and there is free entry in the long run. The market demand function is Qd = 615 - 5P, which is measured in tons per month. Each producer in the industry has a fixed cost of $400 and a marginal cost function given by MC = 2q +3, where is the output of an individual producer. (a) Calculate the long-run market equilibrium price and quantity. How many firms are there in the economy? Suppose the marginal cost deceases by $2 from the long-run equilibrium (b) Calculate the new short-run market equilibrium price and quantity. (c) Are the firms making economic profit or loss in the short nn? Explain briefly without calculation. (d) Draw a graph to show the short-run response of the economy. Mark the equilibrium price and quantity clearly on the graph. (e) Now suppose, in addition to the change of the marginal cost the fixed cost, increased by $100. Will the number of firms increase or decrease in the long run? Explain briefly 2) PERFECTLY COMPETITIVE MARKET Suppose the wheat growing industry in Canada is perfectly competitive and there is free entry in the long run. The market demand function is Qd = 615 - 5P, which is measured in tons per month. Each producer in the industry has a fixed cost of $400 and a marginal cost function given by MC = 2q +3, where is the output of an individual producer. (a) Calculate the long-run market equilibrium price and quantity. How many firms are there in the economy? Suppose the marginal cost deceases by $2 from the long-run equilibrium (b) Calculate the new short-run market equilibrium price and quantity. (c) Are the firms making economic profit or loss in the short nn? Explain briefly without calculation. (d) Draw a graph to show the short-run response of the economy. Mark the equilibrium price and quantity clearly on the graph. (e) Now suppose, in addition to the change of the marginal cost the fixed cost, increased by $100. Will the number of firms increase or decrease in the long run? Explain briefly