Demand for coffee is given by the Qd = 150000-15000p, where p is the market price. The market for coffee is completely aggressive. Each firm has access to the same technology which yields a marginal cost curve given by MC (q) =q/2000, where q is the quantity supplied by an individual firm. There are initially 60 firms supplying coffee.
1. Determine the market supply curve?
2. Explain the short-run equilibrium price and the quantity in the market? Discuss how much tea does each individual firm supply?
3. Each firms average cost curve achieves its minimum point when it produces q = 1000.What is the market price and quantity in the long-run equilibrium? Determine how many firms are there in the long run?