A perfectly competitive painted necktie industry has a large number of potential

Question

A perfectly competitive painted necktie industry has a large number of potential entrants. Each firm has an identical cost structure such that long-run average cost is minimized at an output of 20 units (Q(I)=20). The minimum average cost is $10 per unit. Total market demand is given by Q(d) = 1500-50P

Q1 What is the industry's long-run supply schedule?

Q2 What is the long-run equilibrium price (P*)? The total industry output (Q*)? The output of each firm Q*(I)? The number of firms/ The profits of each firms?

Q3 The short-run total cost curve associated with each firm's long-run equilibrium output is given by STC = 0.5(Q^2) - 10Q + 200 where SMC = q-10. Calculate the short run average. At what necktie output level does short-run average cost reach a minimum?

Q4 Calculate the short-run supply curve for each firm and the industry short-run supply curve

Explanation / Answer

2)In the long run P=AC=$10
Y=1500-50x10=1500-500=1000
The number of firms= 1000/20=50

3)In the short run,MC=q-10
MR=30-0.04y
MC=MR=y-10=30-0.04y
1.04y=40
y=40/1.04=38.46
p=30-0.04x38.46=30-1.54=28.46.

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