Total cost in long run will be: (,,) = 4R² + 4 +

Profit Maximization in a Competitive Market:

This firm produces and supplies in a perfectly competitive market in which aspirin price is $40 (per pack). Also, this firm can rent machines at a fixed rental rate of $2 (R= $2), and hire workers at a fixed wage rate of $3 (W= $3).

a)Write the equation for this firm's profit. [Hint: write the firm's profit as a function of output (q).]

b)Find the profit-maximizing value of q. Draw a graph to support your answer.[Hint: = / = 8 2 + 24 = 16 + 24]

c)If the firm produces the optimal level of q from part (b), how much will it earn in profit?

d)* If the firm produces 10 units of aspirin, how much will its profit/loss? If the firm stop producing aspirin, how much will its profit/loss?

e)If the firm rents 10 machines (capital), how many labours should the firm hire to produce the optimum amount of output?

Firm's Supply:

This firm has a fixed number of capital and cannot change it in short run. The firm's short-run total cost is ()=5²+30+50 [Hint: = / = 10q + 30]

f)Calculate the price below which this firm in the market will not produce any output(the shutdown price) in the short run.

g)Find the short-run supply curve for this firm.

Market Supply:

In total there are 20 firms in this industry. 50 percent of the firms have the same short-run supply curves as the above firm, they are "type-A"firms. The others are "type-B" with short-run supply curves = 0.1 + 5.5.

h)Derive the short-run industry supply curve. Market Equilibrium: Assume the market demand curve is given by = 125 0.5.

i)Find the market equilibrium price and quantity. [Hint: Do not forget to check your answer]

j)At this price, how many packs of aspirin are produced by the type-A and B firms, respectively?

k)Determine total industry surplus at the equilibrium.