Problem
Imagine that for some reason there can be only 300 firms producing pfillip; only these 300 firms have licenses, say. In the long run, these 300 firms can exit the market (and later reenter, if conditions warrant), and they can vary the amount of legume and kapitose they use. In the intermediate run, firms cannot leave (or enter), but they vary their factor usage. In the short run, firms can only change their levels of legume usage. Assume the price of kapitose is q = $.50, no matter how much kapitose is used by pfillip producers. (That is, we are back in the setting of section 8.2.)
(a) Suppose demand is given by D(p) = 400 -100p. What is the long-run equilibrium in this industry?
(b) Suppose the equilibrium computed in part (a) is reached, and then demand suddenly shifts to D(p) = 750- 150p. What is the short-run equilibrium position? What is the intermediate-run equilibrium position? What is the new, long-run equilibrium position?
(c) What is the long-run industry supply curve?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.