Problem
The inexpensive fashion wristwatch industry is perfectly competitive. Each firm producing the watches has cost curve given by C = 100 + 20q + q . (You may assume this is both the short-run and the long-run cost curve.) Currently, there are 50 firms producing the watches, and the market demand is given by Q = 3500 - 25p.
a) Calculate the short-run market equilibrium price.
b) Calculate the long-run market equilibrium price.
c) Calculate the number of firms in long-run equilibrium.