Newsprint (the paper used for newspapers) is produced in a perfectly competitive market. Each identical firm has a total variable cost TVC(Q) = 40Q + 0.5Q2, with an associated marginal cost curve SMC(Q) = 40 + Q. A firm's fixed cost is entirely nonsunk and equal to 50.
a) Calculate the price below which the firm will not produce any output in the short run.
b) Assume that there are 12 identical firms in this industry. Currently, the market demand for newsprint is D(P) = 360 − 2P, where D(P) is the quantity consumed in the market when the price is P. What is the short-run equilibrium price?