An industry currently has 100 firms, each of which has fixed cost of $16 and averagevariable cost as follows:Quantity Average Variable Cost1 $ 12 23 34 45 56 6a. Compute a firm’s marginal cost and average total cost for each quantity from 1 to 6.b. The equilibrium price is currently $10. How much does each firm produce? What isthe total quantity supplied in the market?c. In the long run, firms can enter and exit the market, and all entrants have the samecosts as above. As this market makes the transition to its long-run equilibrium, willthe price rise or fall? Will the quantity demanded rise or fall? Will the quantitysupplied by each firm rise or fall? Explain your answers.
An industry currently has 100 firms, each of which has fixed cost of $16 and average
variable cost as follows:
Quantity Average Variable Cost
1 $ 1
2 2
3 3
4 4
5 5
6 6
a. Compute a firm’s marginal cost and average total cost for each quantity from 1 to 6.
b. The
the total quantity supplied in the market?
c. In the long run, firms can enter and exit the market, and all entrants have the same
costs as above. As this market makes the transition to its long-run equilibrium, will
the price rise or fall? Will the quantity demanded rise or fall? Will the quantity
supplied by each firm rise or fall? Explain your answers.
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