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A profit-maximizing firm in a perfectly competitive industry produces y according to a cost function c(y)...

  1. A profit-maximizing firm in a perfectly competitive industry produces y according to a cost function c(y) = 10+2y+y2. The price of y is 10 per unit.

    a) What is the firm’s optimal choice of how much y to produce and how much profit do they make?
    b) Would you expect the long run price of y in this industry to be higher, lower, or the same as 10 per unit?

    Explain your answer.

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