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Assume that the shoe industry is perfectly competitive

Accounting

Assume that the shoe industry is perfectly competitive. All firms in the market are identical, with TC=50+2Q+2Q2TC=50+2Q+2Q2, and MC=2+4QMC=2+4Q. The market supply curve is given by P=Q+2P=Q+2 and the market demand curve is P=1000−Q.P=1000−Q.

a) How much will each firm produce?

b) What is the shut-down price for the firm?

c) Are profits positive or negative for a representative firm? Explain.

d) What do you expect to happen in the long-run?

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