Newsprint (the paper used for newspapers) is produced in a perfectly competitive industry. Each identical firm has a variable cost VC(q) = 40q + 1⁄2q2, with an associated marginal cost if MC(q) = 40+q. Each firm has an unavoidable fixed cost of 50.
a. Calculate the price below which the firm will not produce any output in the short-run.
b. Assume there are 12 identical firms in the industry. Determine the market supply curve.
c. Now suppose the market demand curve for newsprint is Q = 360 - 2p, where Q is the quantity demanded in the market when the price is p. What is the short-run equilibrium price? What is the short-run equilibrium market quantity?
d. How much will each firm produce at this equilibrium price? How much profits will they make?