The rocking chair industry is composed of 100 identical firms, each having short run costs given by
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The rocking chair industry is composed of 100 identical firms, each having short run costs given by C = 20,000 + 100q + 5q2 where q is each firm's weekly output. Suppose the demand for rocking chairs is given by: Q = 25,000 - 30P
a. What is market equilibrium price and quantity? (Hint: derive industry supply.)
b. How much output will each firm produce? What are its profits (losses)?
c. Should the firm continue to operate in the short run? Draw a diagram of the current situation of the firm and carefully explain your advice.
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