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Perfectly competitive markets # of Contraptions Total Cost 0 500 1 580 2 640 3 690...

Perfectly competitive markets

# of Contraptions

Total Cost

  1. 0 500

  2. 1 580

  3. 2 640

  4. 3 690

  5. 4 730

  6. 5 760

  7. 6 800

  8. 7 850

  9. 8 950

  10. 9 1200

  11. 10 2000

e) Firms now exit the contraption market, and contraption price goes up to $250. Graph this result, showing market and firm graph side by side. How many units will a firm with the above cost function produce? What will profit be? (It might be helpful to show a new Table or at least add a couple of columns to the existing one).

f) At this point, will more firms exit, or will new firms start to enter the market? Explain.
g): What is the long run equilibrium price? What is profit? (Show all calculations) Why will firms not leave the market?

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