Consider the market for a homogeneous good. Suppose the inverse demand function for this good is...

 

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Consider the market for a homogeneous good. Suppose the inverse demand function for this good is P(Q) = 20 - 1/1/2 and the cost function of a firm is C(Q) = 20Q — 2Q² + 11/20⁰ Q² (1)Suppose first that the market is perfectly competitive. First, find the long run supply curve for firms. Second, find the equilibrium price and quantity in the long run. Third, find consumer surplus in the long run. (2) Now suppose that there is only one firm in the market so it is a monopoly. Find the monopoly price and quantity. Then, find consumer surplus. Is consumer surplus more or less in the monopoly? Consider the market for a homogeneous good. Suppose the inverse demand function for this good is P(Q) = 20 - 1/1/2 and the cost function of a firm is C(Q) = 20Q — 2Q² + 11/20⁰ Q² (1)Suppose first that the market is perfectly competitive. First, find the long run supply curve for firms. Second, find the equilibrium price and quantity in the long run. Third, find consumer surplus in the long run. (2) Now suppose that there is only one firm in the market so it is a monopoly. Find the monopoly price and quantity. Then, find consumer surplus. Is consumer surplus more or less in the monopoly?

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ANSWER 1 In a perfectly competitive market each firm produces at the minimum point of its average co... View the full answer