We are once more considering a perfectly competitive market for detergent. Market demand for detergent is
Qd = 400 - 5P
Each firm's short run supply curve is
q = 2 +
Refer to the table below for the average variable costs and the fixed costs in which each single firm incurs while producing a given quantity
Quantity (q) AVC FC
5 1 36
6 2 36
7 3 36
8 4 36
9 5 36
1. In the beginning, 74 firms are in this competitive market. All firms are equal.
(a) What is the total market supply curve when 74 such firms are producing at the same time?
(b) What is the equilibrium price and quantity in this case?
(c) What is the profit made by each firm?
(d) What will happen to the number of firms in the industry in the long run?
2. Suppose, for some reason, the number of detergent manufacturers in the perfectly competitive market decreased to 50.