All firms in the competitive jawbreaker (giant gumball) industry has a total cost function of:
c(q) = 1/4q + 1/10q^2 + 10
The demand for this product is defined by:
p = 4 - (1/1000)Q
1: What is the long-run market price and quantity in this market? How many firms will produce jawbreakers?
2: Assume that a study is released revealing that four out of five dentists believe that jawbreakers promote tooth decay. Demand plummets to:
p = 3 - (4/875)Q Assume that the number of firms is fixed in the short-run. What is the industry’s short-run supply curve? What is the new market equilibrium price and quantity. How much does each firm earn in profits?