Q1. The market for apples is perfectly competitive. Say a typical firm has a marginal cost function of MC(q) = 2q.
(1) The optimal quantity of apples to produce is 10 for the typical firm. How much revenue does the firm earn?
(2) In the short run, what condition causes a perfectly competitive firm to shut down? Will a firm remain in the apple business if they are incurring a loss?
Q2. Imagine there is a market for buying monopolies which is perfectly competitive and is at its long run equilibrium. Assume all firms in this market have only two options: run the monopoly themselves or sell it. What is the profit the monopolies will make after they are purchased?