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Consider the following setup for a perfectly competitive market: Suppose that for the firm, T C equals 400 plus Q squared, and M C equals
Consider the following setup for a perfectly competitive market: Suppose that for the firm, T C equals 400 plus Q squared, and M C equals 2 Q. For the corresponding market, suppose that demand is given by P equals 200 minus 1 half Q and supply is given by P equals 1 half Q. Now suppose that there is an increase in supply, so that P equals negative 120 plus 1 half Q is the new supply curve. Will firms have an incentive to enter or leave the market? Firms will enter. Firms will leave. Cannot be determined. Firms will neither enter or leave the market
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