Question

Perfectly competitive markets

# of Contraptions

Total Cost

0. 0 500

1. 1 580

2. 2 640

3. 3 690

4. 4 730

5. 5 760

6. 6 800

7. 7 850

8. 8 950

9. 9 1200

10. 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?

Answer 1