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In a perfectly competitive market, industry demand is given by Q = 1,000 - 20P. The typical firm's average cost is AC = 300/Q + Q/3.
a. Confirm that Qmin = 30. (Hint: Set AC equal to MC.) What is ACmin?
b. Suppose 10 firms serve the market. Find the individual firm's supply curve. Find the market supply curve. Set market supply equal to market demand to determine the competitive price and output. What is the typical firm's profit?
c. Determine the long-run, zero-profit equilibrium. How many firms will serve the market?
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