1. Assume that each firm in a perfectly competitive market faces the following long-run total cost function (LTC) and inverse demand function.
LTC = 2q - 2q2 + q3;
Inverse Demand: p = 1001 - Q,
where p is price, q is firm output, and Q is industry output. Determine the long-run equilibrium:
A. Graph the firm’s long-run average cost and show that it reaches a minimum where q =1.
B. Determine the long-run equilibrium price (p*) and the firm’s long-run equilibrium output (q*).
C. Determine the long-run industry output (Q*).
D. Determine the long-run number of firms in the industry (n*).