Question: Consider a market with demand function x(p) = A- Bp in which every potential firm has cost function c(q) = K + aq + Bq2,

 Consider a market with demand function x(p) = A- Bp in

Consider a market with demand function x(p) = A- Bp in which every potential firm has cost function c(q) = K + aq + Bq2, where a > 0 and B > 0. 1. Calculate the long-run competitive equilibrium price, output per firm, aggregate output, and number of firms. Ignore the integer constraint on the number of firms. How does each vary with A? 2. Now examine the short-rum competitive equilibrium response to a change in A starting from the long-run equilibrium you identified in (1). How does the change in price depend on the level of A in the initial equilibrium? What happens as A - co? What accounts for this effect on market size

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