Qd = 2,400 – 20p, p = 120 - q/20, AC = 625/q + 0.25q
Currently, 20 firms serve the market.
a. The individual firm’s supply curve is the part of MC curve after the intersection with AVC curve. So, S(firm) = MC = TC' = (AC*q)' = (625 + 0.25q^2)' = 0.5q.
b. The industry supply curve is S(industry) = 20*S(firm) = 20*0.5q = 10q.
c. The short‐run competitive price and output are in the equilibrium point, at which Qd = Qs, so:
As S = p = 10q, then Qs = 0.1p, Qd = 2,400 – 20p,
2,400 - 20p = 0.1p,
20.1p = 2,400,
p = $119.4,
q = 11.94 units.
d. The total profit that typical firm is making is:
TP = (p - AC)*q = (119.4 - 625/11.94 - 0.25*11.94)*11.94 = $765.
e. In the long‐run all firms receive zero profits and p = AC, so the market price and quantity are:
p = 625/q + 0.25q,
120 - 0.05q = 625/q + 0.25q,
625/q + 0.3q - 120 = 0,
0.3q^2 - 120q + 625 = 0,
q = (120 - 116.83)/0.6 = 5.28 units, so less firms will operate.
p = 120 - 5.28/20 = $119.74.