A perfectly competitive industry has a large number of potential entrants. Each firm has an identical cost structure such that long-run average cost is minimized at an output of 20 units (qi=20). The minimum average cost is $10 per unit. Total market demand is given by

QD=1,00050P

(a) In the long run, what is the equilibrium price? The total industry output? The output of each firm? The number of firms? The profit of each firm?

(b) Suppose the market demand function shifts upward to

QD=1,20050P

and that firms cannot change their outputs as given in part a. In the very short run, what is the equilibrium price? The total industry output? The output of each firm? The number of firms? The profit of each firm? (5 marks)

(c) If the short-run total cost curve each firm faces is given by

STC=2.5q^220q+100,

what is the short-run equilibrium price? The total industry output? The output of each firm? The number of firms? The profit of each firm?

(d) With the demand function as given in (b), what is the long-run equilibrium price? The total industry output? The output of each firm? The number of firms? The profit of each firm?