The market for study desks is characterized by perfect competition. Firms and consumers are price takers and in the long run there is free entry and exit of firms in this industry. All firms are identical in terms of their technological capabilities. Thus the cost function as given below for a representative firm can be assumed to be the cost function faced by each firm in the industry. The total cost and marginal cost functions for the representative firm are given by the following equations:

TC = 2qs^2+ 5qs + 50

MC = 4qs + 5

Suppose that the market demand is given by:

PD = 1025 - 2QD

Note: Q represents market values and q represents firm values. The two are different.

Question 1: At the new long-run equilibrium, how many firms will be in the industry?

a. 32

b. 45

c. 150

d. 230

Question 2. At the new long-run equilibrium, what will be the output of each representative firm in the industry?

a. 4

b. 5

c. 3

d. 2

Question 3. Determine the equation for average total cost for the firm

a. 2qs + 2 + 50/qs

b. 2qs + 5 + 50/qs

c. 3qs + 5 + 50/qs

d. None of the above

Question 4. Determine the market quantity Q from the market demand curve, given that we know the above calculated market price.

a. 23

b. 504

c. 34

d. 89

Question 5. In the long-run given this technological advance, how many firms will there be in the industry?

a. 34

b. 84

c. 32

d. 56

Question 6. Now suppose that the number of students increases such that the market demand curve for study desks shifts out and is given by, PD = 1525 - 2QD . What will be the new long-run equilibrium price in this industry?

a. 25

b. 34

c. 23

d. 45

Question 7. Now, consider another scenario where technology advancement changes the cost functions of each representative firm. The market demand is still the original one (before the increase in the number of students). The new cost functions are: TC = qs^2+5qs + 36 MC = 2qs + 5 What will be the new equilibrium price?

a. 17

b. 4

c. 2

d. 6

Question 8. What is the long-run equilibrium price in this market?

a. 12

b. 14

c. 25

d. None of the above

Question 9. What is the long-run output of each representative firm in this industry?

a. 5

b. 3

c. 6

d. 7

Question 10. When this industry is in long-run equilibrium, how many firms are in the industry?

a. 3

b. 80

c. 40

d. 100