Unformatted text preview: b. To determine the individual firm's output, equate price and marginal cost: P = 2 = 0.2q q = 10 Firm's π = TR – TC = 2*10 – (9+0.1*100) = 20 - 19 = 1 c. Firms are earning economic profit so we would expect entry to occur, causing the market supply curve to shift rightward. With new firms entering industry, the market supply increases, causing the market price to fall, which in turn reduces profits that each firm is earning. This will continue until we reach long-run equilibrium at zero profit....
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- Spring '08
- Supply And Demand, market supply, market supply curve