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All firms operating in a perfectly competitive market have the variable cost function VC = 0.2Q2+ 2Q and the firms' fixed cost is 120. The market demand and supply functions for this good, denoted by Qmd and Qms are given by
Qmd = 107 - 4P Qms = -37 + 2P
where Qmd and Qms are in units of 1000.
(a) What is a typical firm's profit maximizing level of output?
(b) What is a firm's maximum profit?
(c) How many firms are in the market?
(d) If similar firms enter the market, what would the long-run price be in this market?
(e) What is a firm's output in the long-run?
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