2. Suppose that firms in an industry have the following cost function: C = 100 + 0.25q2, and the industry faces an inverse demand curve of P = 90 – 2Q.

Question

2.	Suppose that firms in an industry have the following cost function: C = 100 + 0.25q2, and the industry faces an inverse demand curve of P = 90 – 2Q.
a.	I f the industry is competitive, find the long-run equilibrium price, quantity, and profit of a typical firm. How many firms are in the industry?
b.	Now suppose one firm (with the same cost function) has monopolized the industry.  What is the monopoly price, quantity and level of profit?
c.	What is the change in consumer surplus of the monopoly equilibrium relative to the competitive equilibrium? 
d.	What is the deadweight loss?
e.	Graphically illustrate the equilibria under the 2 market structures.

muktar · Answer

p=230-q and TC=10=0.25q2