A raincoat producer has short-run cost function
C(q) = 50 +q+(1/10)*q^2
(a) Show the firm's marginal and average cost curves on a properly-labeled graph.
(b) If the price of a raincoat is $4, how much will the firm supply? Will it make a profit, a loss, or neither? (If a profit or a loss, calculate its size.)
(c) Is there a price below which the firm won't supply any quantity even in the short run? Explain.
(d) Equate price and marginal cost to find the firm's short run supply function q(p) and graph it on a well-labeled graph.
(e) If the market consists of 100 firms just like this one, find and graph the short-run industry supply curve.
(f) Suppose that this firm has constant returns to scale; what does this tell you about the shape of its LRAC curve? What about the firm's LR supply curve?
(g) Is the industry in long-run equilibrium? How do you know? If yes, explain why. If no, find the price associated with long-run equilibrium.
(h) In the long-run equilibrium, will there be more or fewer than the current 100 firms in the market? Explain.