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Suppose we have a competitive industry with many firms, all of which have the cost function c(y) = y^2 + 1 when y > 0
Suppose we have a competitive industry with many firms, all of which have the cost function c(y) = y^2 + 1 when y > 0 and c(0) = 0. Suppose that. initially, aggregate demand is D(p) = 84p. Note that the number of firms has to be an interger amount, but that prices and quantities do not have to be intergers. (a) Solve for an individual firm's supply curve? If there are n firms in the market, what is the market supply curve? (b) In the long-run, what is the minimum price at which this product will be supplied? (c) What is the equilibrium number of firms in the market? (d) What is the equilibrium price? What is the output of every firm in the market?(e) What is the aggregate output of all firms in the market at the equilibrium? (f) Now, suppose that the market demand curve shifts to D(p) = 84.5p. What will be the equilibrium number of firms be now? What will be the equilibrium price? What will be the output of each firm? What will be the profit of each firm in the market? (g) Now, suppose that the market demand curve shifts to D(p) = 85 p. What will be the equilibrium number of firms? What will be the equilibrium price? What will be the output of each firm in the market? What will be the profit of each firm in the market
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