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| Suppose that the identical firms in a perfectly competitive market for cakes have long-run total cost functions given by TC(Q) = 10Q3 – 60Q2 + 100Q. Total cost is independent of the number of firms and total output in the market. a. Describe the long-run supply curve for this industry. b. Suppose market demand is QD = 1,000 – 40P. Solve for the long-run competitive equilibrium price, output per firm, and number of firms in the market. c. Suppose demand decreases to QD = 800 – 40P. Solve for the long-run competitive equilibrium price, output per firm, and number of firms in the market. |
