Suppose that each firm in a competitive industry has the following costs:

Total cost:................TC 5 50 1 ½ q2

Marginal cost: ...........MC = q

where q is an individual firm's quantity produced.

The market demand curve for this product is

Demand: QD = 120 - P

where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market.

a. What is each firm's fixed cost? What is its variable cost? Give the equation for average total cost.

b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity?

c. Give the equation for each firm's supply curve.

d. Give the equation for the market supply curve for the short run in which the number of firms is fixed.

e. What is the equilibrium price and quantity for this market in the short run?

f. In this equilibrium, how much does each firm produce? Calculate each firm's profit or loss. Is there incentive for firms to enter or exit?

g. In the long run with free entry and exit, what is the equilibrium price and quantity in this market?

h. In this long-run equilibrium, how much does each firm produce? How many firms are in the market?