1. Consider a competitive industry consisting of 100 identical firms each with the following cost schedule:
Output Total Cost
Market demand is given by the following schedule:
Price: $360 290 230 180 140 110 80
Quantity Demanded: 400 500 600 700 800 900 1000
a. Draw the supply curve for an individual firm. On a separate graph, draw the demand and supply curves for the industry as a whole. Indicate the equilibrium price and output. Now draw the individual firm's demand curve on your first graph and show the firm's equilibrium, price and output.
b. Explain why the equilibria found in part (a) are only short-run equilibria. What will happen in the long run?
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