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A firm has a demand curve D(p) = 32-2p in a purely competitive market. The market supply curve is S(p)=2+p. Suppose there are "n" numbers of firms in the industry. Each firm has a cost function of c(y)=y^3+4y+3.
a) Find the market equilibrium price and quantity.
b) In the long-run, how many firms will persist in the market? (Hint: In long-run, profit of a firm is zero and find "n".)
A profit-maximizing firm with market power will always produce a level of output where
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The accompanying graph (top of next page) summarizes the demand and costs for a firm that operates in a perfectly competitive market.
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