Suppose the inverse market demand curve is p=100-Q, where p is the market price and Q is the aggregate market quantity. Suppose there are n firms in the market. The output of firm i is denoted by qi. So Q=q1+q2+…+qi+…+qn the market. A firm i’s cost function is ci(qi)=25+qi2, if qi>00, if qi≤0. This cost function shows that there are is no entry cost.

1. Determine the average and marginal cost curves of firm i and their shapes, and draw them in a diagram.
2. Using the diagram in part (i), determine the long-run equilibrium output produced by any firm i in a perfectly competitive market, the long-run equilibrium market price, market output, and the number of firms. Denote these equilibrium outcomes with superscript “pc” that denotes perfect competition. Represent them diagrammatically.

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Step 1 The equilibrium of the company was obtained by adjusting the plant to operate at the lowest longterm average cost Over time all businesses can ... View the full answer