Solved Assignments There are 100 Type A firms in existence with marginal cost curves MC = 10 + .5Qi, where Q i is…


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There are 100 Type A firms in existence with marginal cost curvesMC = 10 + .5Qi,where Qi is the output of an individual firm. These firms have no fixed costs. Demand isQ = 1000 − 50P,where P is market price. a. Assuming that all of these firms are currently in operation, what will be the market price? How much will each firm produce? b. Assume that it is not possible to open any more firms of the first type, because they use an input that is fixed in supply. It is, however, possible to open an unlimited number of Type B firms with supply (marginal cost) curvesHow many of them will enter the industry? c. What will be the long-run equilibrium price? What happens to the profits of the type As? d. Draw the supply curves to this market before and after entry of the Bs. e. Now assume that there is another alternative to buying from Type A and Type B firms, a world market in which X is available at $30. What will be the equilibrium price and the outputs of the two types of firms? f. The U.S. government next prohibits all imports of X. Does this make Type A firms better off than before the prohibition? How about Type Bs?

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