FC = 50 | MC = 10Q

B = 9

Competitive Market: Suppose that your firm is one of a number of identical firms operating in a competitive industry. The current price in that market is given by P_SR. Use your value of B and the table below to look up P_SR.

B 1 2 3 4 5 6 7 8 9 10

P_SR 14 18 24 28 30 36 35 40 36 50

(a) Produce a new graph that plots this price along with the MC and ATC curves.

(b) How many units does your firm produce? Mark this level of output on your graph.

(c) Does your firm make a profit, a loss or breakeven in the short-run? Calculate the profit/loss.

(d) Based on your answer above, would you expect to see entry, exit or no change in the

number of firms as we move to the long-run? On your graph indicate the long-run price

(P_LR).

(e) Assume that market demand is given by: Q^d = 1000 - 2P

Recall that all firms are identical in this industry. How many units does each firm

produce, and how many firms are operating in this market in the long-run?