Topic 5 Market Structure 5.1 Suppose the hand-made dining table production industry is perfectly competitive. Now consider the long run where the quantity used for all factors of production can be changed. Consider the following long-run cost information of a typical rm. Number of tables Total Cost (5) Average Cost Marginal Cost er da 0 S $ l 1 15 l 2 24 I 3 33 l 4 40 I 5 50 l 6 66 | 7 84 (a) Complete the above table by calculating the average cost and marginal cost for each of the output level. (b) If the market price is $7, how much will a typical rm produce? If the market price is $10, how much will a typical rm produce? Explain your answer. (Assume the rm will produce if it is a break-even at the marginal unit.) (c) What is the long-run equilibrium price and quantity of output of a typical rm? How large is the economic prot earned by each rm? Explain how you come up with your answers. (d) If the market demand (per day) is given by Q = 10000 400P. How many rms are there in the industry in the long run equilibrium? (e) If the market demand increases to Q = 12000 400P and there is no change in each rm's cost curves. How will it change the long run equilibrium price, equilibrium market quantity, equilibrium quantity produced by each rm and the prot of each rm? Explain your answers and describe the adjustment process. (f) If the supply of wood decreases due to increased wildre and the average and marginal cost of production of a typical rm increased by $1 at all quantities. How does it change the long-run equilibrium price and quantity output of each typical rm? If the demand remains at 0: 10000 - 400P, how would the number of rms in the industry change? Explain