The market for good X is perfectly competitive. The demand and supply functions of good X are given as follows: Demand: Qd = 6000 – 30 P Supply: Qs = –500 + 20 P Qd is quantity demanded in thousand units, Qs is quantity supplied in thousand units, and P is the unit price in dollars for good X. Currently, there are 1000 identical profit-maximizing firms in the market and the production cost of each firm does not depend on the total number of firms in the market. Currently, the market is in long-run equilibrium.
a. What are the equilibrium market price and market quantity for good X? Briefly explain your answer.
b. What is the output of each firm in this long-run equilibrium? Briefly explain your answer.
c. Now suppose that the government requires each firm in this market to pay $10,000 company registration fee. After paying this fee, a firm can product whatever output it wants. In other words, this fee will not change with the production of a firm.
i. Briefly explain how this registration fee will affect the market equilibrium output and price in the short run. ii. Briefly explain how this registration fee will affect the market equilibrium output and price in the long run.