| Question |
Suppose there are 100 identical firms in the perfectly competitive note card industry. Each firm has a short-run total cost curve of the form: STC = 1/300 q3 + 0.2q2 + 4q + 10 and marginal cost is given by SMC = .01q2 + .4q + 4 a. Calculate the firm’s short-run supply curve with q (the number of crates of note cards) as a function of market price (P). b. Calculate the industry supply curve for the 100 firms in this industry. c. Suppose market demand is given by Q = -200P + 8,000. What will be the short run equilibrium price-quantity combination? d. Suppose everyone starts writing more research papers and the new market demand is given by Q = –200P + 10,000. What is the new short run price-quantity equilibrium? How much profit does each firm make? |
