Reference no: EM131169316
A perfectly competitive painted necktie industry has a large number of potential entrants. Each firm has an identical cost structure such that long-run average cost is minimized at an output of 20 units (qi=20). The minimum average cost is $10 per unit. Total market demand is given by Q=1,500-50P.
A) What is the industry's long-run supply schedule.
B) What is the long-run equilibrium price (P*)? The total industry output (Q*)? The output of each firm (q*i)? The number of firms? The profits of each firm?
C) The short-run total cost curve associated with each firm's long-run equilibrium output is given by: STC=0.5q^2-10q+200 where SMC=q-10 calculate the firm's short-run average and marginal cost curves. At what necktie output level does short-run average cost reach a minimum?
D) Calculate the short-run supply curve for each firm and the industry supply curve.
E) Suppose now painted neckties become more fashionable and the market deman function shifts to Q=2,000-50P. Using this demand curve, answer part B for the very short run when firms cannot change their output.
F) In the short-run use the industry short-run supply curve to recaclulate the answers to part B.
G) What is the new long-run equilibrium for this industry?
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: A perfectly competitive painted necktie industry has a large number of potential entrants. Each firm has an identical cost structure such that long-run average cost is minimized at an output of 20 units (qi=20). What is the industry's long-run supply..
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