Consider a perfectly competitive market where the typical firm has a total cost of C(q) = 0.1q^2 + 2q + 160. In the short run, the fixed cost is

entirely sunk.

a) Find the long run equilibrium price.

a.1) Find the minimum efficient scale of the typical firm.

a.2) Find the typical firm's average cost when it operates at minimum efficient scale.

a.3) In the long run, what price will prevail in this market? In words, clearly justify your answer.

Suppose demand is QD = 3,200 - 100P.

b) Explain why you expect the number of firms in this market to be fifty-five.

c) In this market, what is the short run supply function of the typical firm?

d) What is the short run market supply function?

Suppose the local government introduced a $90 licensing fee that raised the fixed cost from $160 to $250.

e) Would the introduction of the licensing fee affect the short run equilibrium price or quantity? Justify your answer?

f) Would the introduction of the licensing fee affect firms' short run profit?

g) Clearly explain why you expect that in the long run fewer larger firms will operate in this market.

h) After the introduction of the licensing fee, what is the new long run equilibrium price?

i) How many firms will survive in this market?