Consider the market for fixies in Somerville. (A fixed-gear bicycle (or fixed-wheel bicycle) is a bicycle that has no freewheel, meaning it cannot coast, because the pedals are always moving when the bicycle is in motion. They are popular among hipsters in Cambridge.) The supply side of the market is perfectly competitive and is composed of fixie producers, who each have a long run cost curveC(q)=2q+5q2. The demand side of the market comprises all the hipsters who live in Somerville (since they do not have fixies yet, their travel costs are really high so they only buy their fixies in Somerville). Market demand isQD=8.52p. Afraid that all commercial real estate in Somerville is going to be taken over by fixies producers, the mayor of Somerville caps the maximum number of firms to25.What is the long run equilibrium price in the market for fixies?

E1)Suppose instead implementing of a price ceiling, the mayor decides to increase the number of licenses for fixie producers to70.

What is the quantity produced by each firm?

qLR=

What is the profit that each firm earns?

LR=

What is the total quantity demanded?

QLRD=

What is the total quantity supplied?

QLRS=

What is consumer surplus under the new number of licenses for fixie producers?

CS=

What is producer surplus?

PS=