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Assume there is perfect competition in this industry

Sociology Nov 25, 2021

Assume there is perfect competition in this industry.

Total cost curve of each producer is represented by (Q^2/4)+4.

Marginal cost = Q/2

Q is quantity produced.

Qm=1000-200P

Qm is market demand.

1) Market price is 4 in the short run. How many producers operate in this market in the short run? Do they make a profit?

2) What is the market price in the long run? How many producers are in the long run and how much do they produce?

3) Assume there is now a license fee to enter this market. How would it affect the market price, the number of producers and quantity they produce relative to your answer in 2?

Please explain step by step with a diagram if possible.

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