1.

Consideringthe same demand curve as in exercise 22, now let us allow for freeentry and exit of the firms producing commodity X. Also assume themarket consists of identical firms producing commodity X. Let thesupply curve of a single firm be explained asqSf = 8 + 3p for p ≥ 20 = 0 for 0 ≤ p < 20(a) Whatis the significance of p = 20?(b) At what price will the market for X be in equilibrium? State thereason for your answer.(c)Calculate the equilibrium quantity and number of firms.

Answer»

Considering
the same demand curve as in exercise 22, now let us allow for free
entry and exit of the firms producing commodity X. Also assume the
market consists of identical firms producing commodity X. Let the
supply curve of a single firm be explained as



qSf = 8 + 3p for p ≥ 20



= 0 for 0 ≤ p < 20


(a) What
is the significance of p = 20?




(b) At what price will the market for X be in equilibrium? State the
reason for your answer.



(c)
Calculate the equilibrium quantity and number of firms.



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