5. Suppose you are given the following information about a particular industry: - Long-Run Cost function: = C(q) = 100q 3q^2 0.03q^3 Assume that all firms are identical and that the market is characterized by perfect competition.

a. If the current market price is 15, find the long-run profit maximizing output of the firms, and calculate the profit of each firm. (If you like, you can use a graphing calculator to answer this question. Make sure to attach your graphs to your solutions.)

b. Would you expect to see entry into or exit from the industry in the long run? Explain. What effect will entry or exit have on market outcomes?

c. What is the lowest price at which each firm would sell its output in the long run? Is profit positive, negative, or zero at this price? Explain.

6. The short-run marginal cost curves of two types of firms in an industry are given as MC1 = 2q and MC2 = 5q respectively. There are 100 firms of each type. If these firms behave competitively, determine the market supply curve. Calculate the elasticity of market supply at $5. (Note: Assume, for both types of firms, AVC is below MC at any positive output level.)