Let there be n firms. Each firm's fixed cost is F. Afterpaying F, the firm's variable cost for producing q units is cq. Sototal cost for producing q is: TC(q)= F + cq
Average cost is TC(q) /q = F/q + c
which is declining in q.

Note that marginal cost is derivative of TC(q)/derivative of q= c.

a, If the prie of output is p>c, how much should a typical firm produce? can there be a competitive equilibrium in this case?

b, If the price of output is p

c. If the price of output is p=c, how much should a typicalfirm produce?

d. Let the industry demand for output be Q=A-p
where Q is total industry output. Let A > nc. Is p=c a competitive equilibrium? Will a competitive frim want to pay F to enter theindustry?

e. If there is only one firm in the industry, how much outputwill this natural monopoly want to produce? What is its profit?