Assume that there is a competitive industry composed of five identical firms, each of which has the following cost schedule: The firm's level of marginal cost is equal to a quarter of its own level of output. For example, at an output level of 10, marginal cost = 2.5, at an output of 20, MC = 5, etc. If there are ten consumers, each with the demand curve, Q = 40 2P:
a) What is the short run equilibrium level of each firm's output?
b) If fixed costs are $50, what is each firm's level of short run equilibrium profit or loss?
c) What is consumer surplus at the competitive market equilibrium?
[Hint: a graph would help].
d) What is producer surplus at the competitive market equilibrium?