Demand for coffee is given by the Qd = 150000-15000p, where p is the market price. The market for coffee is perfectly competitive. Each firm has access to the same technology which yields a marginal cost curve given by the 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. Determine the short-run equilibrium price and quantity in the market?
3. Explain how much tea does each individual firm supply?
4. Each firms average cost curve achieves its minimum point when it produces q = 1000. Determine how many firms are there in the long run? In the long-run equilibrium, what are the market price and quantity?