# Suppose the demand function for widgets is Q(p) = 60 – p, and all firms that produce widgets have total cost function C(q) = 16 + q^3.a) Suppose that the market is perfectly competitive and there is free entry and exit. All firms that enter use the same technology. A firm that decides to stay out of the market can avoid paying the fixed cost and has a profit of zero. Solve for the long-run competitive equilibrium. What is the long-run equilibrium price? What is the quantity produced by each firm? How many firms will produce in this market?b) What is the consumer surplus under the perfectly competitive model?

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Suppose the demand function for widgets is Q(p) = 60 – p, and all firms that produce widgets have total cost function C(q) = 16 + q^3.

a) Suppose that the market is perfectly competitive and there is free entry and exit. All firms that enter use the same technology. A firm that decides to stay out of the market can avoid paying the fixed cost and has a profit of zero. Solve for the long-run competitive equilibrium. What is the long-run equilibrium price? What is the quantity produced by each firm? How many firms will produce in this market?

b) What is the consumer surplus under the perfectly competitive model?

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Step 1

The given information:

Step 2

Inverse demand function:

Inverse demand function can be calculated as follows:

Step 3

a.)

Long run equilibrium:

Equate the average total cost and marginal cost to get the value of lon...

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