Consider some firms with identical cost functions c(q) = 90 + 20q + 0.1q2 for q>0, and c(0) = 0, where q is firm output. Suppose as well that aggregate demand is D(p) = 800 – 10p.
a) What is the supply function for the single firm?b) If there are 10 firms, what are the competitive equilibrium price
and quantity? What is the consumer surplus? What is each firm’s profit?
c) In the long run firms are free to enter or leave the industry. What is the long run competitive equilibrium price and quantity? How many firms operate in this industry, and what is each firm’s profit?