Course: Microeconomics - Individuals and market supplies

Assume that cheese empanadas are traded in a perfectly competitive market composed of 10 identical firms. The daily market demand is given by D = 420 - 15P, where P is the price of each basket of empanadas and D is the number of baskets sold daily in the market. Furthermore, it is known that, to produce each basket of empanadas, each firm incurs fixed costs (FC) of $16 and variable costs (VC) are given by CV = q²+ 4q, where "q" is the number of baskets of empanadas produced daily.

a) Calculate the short-run supply function of each company and the short-run supply function of the market. Plot and show the calculations performed.

b) Calculate the price and quantity that balances this market in the short term. How much does each company produce and what are its profits? Show your calculations

c) Determine the number of empanada baskets that represent the minimum average total cost (ATC_min). What is the marginal cost (MC) of a basket of empanadas at that point? Show your calculations

d) In a long-run situation, and assuming that the long-run cost function is the same as the short-run cost function, determine the price and quantity of baskets traded in the market. How many firms are needed to satisfy demand in the long run? How many baskets does each firm produce in this scenario and what are the profits each firm earns? Show your calculations