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Suppose that the kite market consists of identical firms with the following long-run costs: C(q)−q2+100C(q)−q2+100

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Suppose that the kite market consists of identical firms with the following long-run costs:

C(q)−q2+100C(q)−q2+100.

Assume that the fixed cost is sunk in the short run, but can be avoided in the long-run by exiting the market. Assume this is a constant-cost industry.

A) From this information alone, what will be the long-run equilibrium price? How many kites will each firm produce? Describe the long-run supply curve for this industry.

B) Suppose the demand for kites is:

QD=8000−50p.QD=8000−50p.

What will be the market equilibrium quantity in the long-run equilibrium? How many firms will operate in the market?

C) Suppose a windy day causes the demand for kites to unexpectedly increase to:

Q=9000−50p.Q=9000−50p.

In the short run, assume there are no new firms can enter this industry. Furthermore, assume that firms have the same short-run cost function as given above. What will be the short-run equilibrium the price of kites and market quantity? How much profit does each firm earn?