Determining the equilibrium price, quantity, and consumer surplus for firms in competitive industry.
There are 5 firms in this perfectly competitive industry for a good that can only be purchased in units of 1 (e.g., 1, 2,3 etc.). The firms have the following marginal cost, or short-run supply, curves:
MC1 = 1+(1/2)Q1
MC2 = 2+(1/2)Q1
MC3 = 3+(1/2)Q1
MC4 = 4+(1/2)Q1
MC5 = 5+(1/2)Q1
1.Sketch the market supply curve for price between p=0 to p=7.
2.If the market demand equation curves for prices between p=0 to p=7.
3. describe how much consumer surplus is being earned at equilibrium?
4.If the government places a tax on the good will costomer surplus decrease or increase?