Consider the preceding question again.
(a) Suppose all of the existing firms have the same cost structure as the new entrant, how many firms are there in the industry?
(b) Each firm in the industry has a total cost curve of the form TC = 400+10Q+ (1/4)Q 2 . There is no distinction between the long run and short run - there is only one possible size of firm. Derive the ATC by dividing each term in the TC curve by Q, and calculate the cost per unit at the output being produced by each firm at the existing equilibrium price.
(c) Since you now know the price and cost per unit, calculate the profit that each firm is making.
(d) Is the ATC sloping up or down at the current equilibrium? [Hint: is the MC above or below the ATC at the chosen output?]