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Please answer all of a, b, and c
The lumber industry (lumber is wood used in manufacturing) in a city is a perfectly competitive industry. The long-run cost function for a lumber firm is C(q)^2 +1000 where q is a standardized amount of lumber. The market demand in the city is ,000-20*P.
a. Find the long-run equilibrium market price and quantity of lumber. How many firms will be in the market?
b. The government decides to impose a per-unit quantity tax of on the suppliers; if a firm sells one unit they must pay 50 to the government. Find the short-run equilibrium price and quantity after the tax is imposed. What is the profit of each firm? Note: to keep things simple, assume an individual firm's long-run marginal cost is the same as their short-run marginal cost.
c. Now find the new long-run equilibrium price and quantity with the tax. How many lumber firms will be in the market? Draw a diagram comparing the equilibrium price and quantity in the three situations: 1) before the tax 2) the short-run after the tax 3) the long-run after the tax.
She has two people who are willing to invest in her corporation if she chooses to go that route. She can get bank loans to grow the business, but is worried about the personal liability she might incur. What would you advise her to do? If you tell..
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