The wood-pallet market contains many identical firms, each with the short-run total cost functionSTC(Q) = 400 + 5Q+Q2, whereQis the firm's annual output (and all of the firm's $400 fixed cost is sunk). The corresponding marginal cost function is SMC(Q) = 5 + 2Q. The market demand curve for this industry isD(P) 262.5 -P/2, wherePis the market price. Each firm in the industry is currently earning zero, economic profit. How many firms are in this industry, and what is the market equilibrium price?
Nov 18 2014 05:58 PM