Consider a perfectly competitive industry, where each firm has an identical short run total cost curve given by
TC(q) = 100 + q2
where q is the output of the individual firm, and all fixed costs are non-sunk.
a. What is the short run supply curve of the individual firm?
b. What is the short run aggregate supply curve for the industry, where there are 200 firms in the industry?
c. Suppose that the aggregate market demand curve is given by QD = 3000 - 50P, where P is the price of the product. What is the short run perfectly competitive price, individual firm output, and overall industry output for the 200 firms?
d. What is the short run shut down price for each firm? How does this short run shut down price differ from the long run shut down price? (you do not need to calculate the long run shut down price, just explain how it differs).
e. Given your answer to part c) above, do you expect there to be entry or exit of firms? Explain your answer. What is the impact of this on the market price?