Suppose all firms in a given industry have the same supply curve given by Si(p) = p/2. Plot and label the four industry supply curves generated by these firms if there are 1, 2, 3, or 4 firms operating in the industry.
(a) If all of the firms had a cost structure such that if the price was below $3, they would be losing money, what would be the equilibrium price and output in the industry if the market demand was equal to D(p) = 3.5? Answer: price = _______, quantity = _______. How many firms would exist in such a market? _______.
(b) What if the identical conditions as above held except that the market demand was equal to D(p) = 8−p? Now, what would be the equilibrium price and output? _______. How many firms would operate in such a market? _______.