Question 4. In 2013, the binder industry was perfectly competitive. The market demand curve for binders was: QD = 1,800 - 100P where P was the price of a binder (in dollars per binder) and QD was the quantity of binders demanded per month. The market supply curve for binders was: QS = 20 + 150P where QS was the quantity of binders supplied per month.

a) Solve for the short run equilibrium price and output of binders (show your work). [2]

b) If a representative binder seller has long-run total cost given by: TC = 1 + q + 0.01q 2 where q is the monthly output of the individual binder seller, what is the long-run, profit maximizing level of output of this firm? Explain your answer. Hint: In the long run, firms produce where ATC is at a minimum. [4]

c) What is the long-run equilibrium price charged in the market for binders? [2]

d) What is the long-run equilibrium output of the binder industry? [2] (Hint: Assume that the firms will meet the demand at the long run price.)

e) Approximately how many binder sellers will there be in the long-run equilibrium (round your answer to the nearest whole number)? [2]