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Assume an industry where the market demand is: P = 120 - 2Q Assume that there are N=4 firms with marginal cost: C(q) = q^2

Assume an industry where the market demand is: P = 120 - 2Q

Assume that there are N=4 firms with marginal cost: C(q) = q^2 + 4q.

Use q to denote the individual output of one firm and so the total output is: Q = N * q

  1. If a firm decides to produce a positive amount, how much it will produce as a function of P?
  2. If supply is equal demand, find the value of q, Q, and P.
  3. In equilibrium (notice this is the short-run equilibrium since the number of firms is fixed), what is the numerical value of a firm's profits?
  4. Before the the long-run is reached, should we expect: entry or exit in this industry.

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