PS5.4.4Consider the attached scenario. Now let's pretend that only technology 2 exists. Suppose that market demand for bicycles is given by D(p) = 820-40p. Furthermore assume that there is free entry for firms using tech 2.Question: What will be the long-run term price in market? P*=

Problem PS5.4.1 2.0/2.0 points (graded) Despondent over the Red Sox's terrible season, Prof. Gruber decides to quit his day job and start a bicycle manufacturing firm in Kendall Square. As he starts looking into the bicycle manufacturing industry, he realizes it has some interesting features. First, he realizes that it operates as a competitive industry. Second, he finds that there are two technologies used by firms in the industry. Technology 1 uses solar power, and has a cost function C' (q) = q + 4q2 + 32 for q > 0. Technology 2 uses electricity from the grid and is more efficient, with a cost function C (q) = q + 2q2 + 32 for q > 0. Assume that we are in the long run, so firms using both technologies can shut and leave the market at 0 cost, so that C (0) = 0 for both technologies