Question

5. (20 points) Consider there are four homogeneous firms with cost function C(a) = are considering whether to enter a market with demand P = 9-Q They 5q + 4 (a) Find two industry supply curves when there are one firm entered the market and two firms entered the market. (b) Draw the curves you found in (a) on a demand-supply diagram and mark these aggregate supply quantity (c) Should the third firm enter the market? Why or why not? Should the fourth firm enter the market? Why or why not? Q1 and Q2, respectively as (d) Draw the long-run industry supply curve in this market.. 5. (20 points) Consider there are four homogeneous firms with cost function C(g) 1q2 +5q+4. They are considering whether to enter a market with demand P 9-Q. (a) Find two industry supply curves when there are one firm entered the market and two firms entered the market (b) Draw the curves you found in (a) on a demand-supply diagram and mark these aggregate supply quantity as Q1 and Q2, respectively. (c) Should the third firm enter the market? Why or why not? Should the fourth firm enter the market? Why or why not? (d) Draw the long-run industry supply curve in this market

Answer 1

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LE Sa/ yaph oCfej fond in D Calalatim ghen by 7hts= at the eapation 9-A/4

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Nowthe Cast o each dn ahn by : 9443+4 ATC= TC mut be equa)to Me Artininimu of ATC ATC =MC t$4 = 49|2 =VV. 4 AFTC = PFTC Cminimum)

in the industy theEation are ims / Papce at martet ATC . So a he erigting fims arc qetng rinal ffit- hoy dont have any incentne to entar for te oerm . 8o,hence ndey this grjuxtin the 3rd ot wella dhe s will not enter into the inderty belause ifthay yth enterr then fhe maxket pnice will deoree further as a Mply of good |&, all he fimr coill gtart lo3ing 3dand uth m net anr int he înduetay gaph of thi mantet: Lerg industry Suply cuve una omageneaus haung 8ame tHere all e frmnr re a) = 4+s1y 9y =419 Stv)y . ATC

hn by The ATCE minimum t ATC 13 n the long un all teindugty tey whe Graph we can pee jhat the long nun fufPly graph fromthe honoa at