Assume an industry consists of identical firms in a typical perfect competitive market. The equation for...

 

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Assume an industry consists of identical firms in a typical perfect competitive market. The equation for market demand is QD = 10,000 - P In the beginning, the market is in long run equilibrium, and each firm has the following cost equations: TC = 25+ q2 and MC = 2q a. (2 marks) Find the fixed cost of each firm. b. (2 marks) Find the equation for each firm's supply. c. (8 marks) If each firm produces 5 units in this industry, find the market price and the number of the firms in the industry. d. (4 marks) Find the equation for the industry supply. e. (10 marks) Due to the epidemic, quantity demanded drops by 1000 units at each price level. In the short run, will a typical firm shut down? Explain with calculation. f. (6 marks) Draw proper figures to illustrate the situation of the market and a typical firm. Label price levels, output quantities of a firm, and market equilibrium quantities. g. (5 marks) Due to epidemic, the demand becomes perfectly elastic at the market price level in (e). To save the industry, here are a few opinions: I Adam: shutdown infected community and enforce strict quarantine policy. Brian: invent new vaccine and achieve herd immunity in the long run. Clair: manage the expectation of people and make demand less elastic. Who is correct? Explain with calculation. Assume an industry consists of identical firms in a typical perfect competitive market. The equation for market demand is QD = 10,000 - P In the beginning, the market is in long run equilibrium, and each firm has the following cost equations: TC = 25+ q2 and MC = 2q a. (2 marks) Find the fixed cost of each firm. b. (2 marks) Find the equation for each firm's supply. c. (8 marks) If each firm produces 5 units in this industry, find the market price and the number of the firms in the industry. d. (4 marks) Find the equation for the industry supply. e. (10 marks) Due to the epidemic, quantity demanded drops by 1000 units at each price level. In the short run, will a typical firm shut down? Explain with calculation. f. (6 marks) Draw proper figures to illustrate the situation of the market and a typical firm. Label price levels, output quantities of a firm, and market equilibrium quantities. g. (5 marks) Due to epidemic, the demand becomes perfectly elastic at the market price level in (e). To save the industry, here are a few opinions: I Adam: shutdown infected community and enforce strict quarantine policy. Brian: invent new vaccine and achieve herd immunity in the long run. Clair: manage the expectation of people and make demand less elastic. Who is correct? Explain with calculation.

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The existence of economic profits attracts entry economic losses lead to exit and in longrun equilib... View the full answer