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Unformatted text preview: Class Handout (October 28) 100B, Prof. Jacobsen Suppose short run total costs for a single firm at a particular capital level are given by: Cshort run = 8 + 4q + 2q 2
Make the simplifying assumption that the capital level implied above is such that min(SRAC) = min(LRAC) Suppose the market demand curve is given by:
Qdemand = 112 ! P a. Find the average cost minimizing quantity per firm. b. How much profit will each firm earn in a long-run equilibrium? c. Find the long run equilibrium price and number of firms under the market demand above. Now imagine that a new lump-sum inspection fee of $2 is charged to each firm by the government (regardless of output quantity). d. First consider the short run (holding the number of firms fixed). How does short run supply change? How much profit will each firm earn in the short run? e. Now consider the eventual long run equilibrium after the inspection fee is imposed. Provide a short written explanation (algebra not necessary) of what will happen and why to: Price Quantity Number of firms ...
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This note was uploaded on 08/09/2009 for the course ECON 100B taught by Professor Rauch during the Winter '07 term at UCSD.
- Winter '07