Currently 10 identical bakeries are producing bread in a competitive market. The cost function for a typical bakery is:
Ci = 6qi + 0.01qi2 + 100.
The demand for bread is:
q = 1800 - 100p
(a) What is the short run market supply curve?
(b) What will be the equilibrium price and volume of bread sales in the market?
(c) At the equilibrium of (b) what is the output per bakery? Are bakeries incurring losses, making profits, or breaking even?
(d) The government imposes a $1 per loaf tax on bread (let them eat cake!). In the short
run what will be market volume and price, and output per bakery? Will individual
bakeries suffer a short-run loss, and if so, how much?
(e) What will be the long run response of market price and volume to imposition of the $1 per loaf tax? How many bakeries will remain, and what will be output per bakery?