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Suppose there are two production processes for making pfillip. In the first, the production function is y = k1f6Z1/3 and fixed costs are 1/6. In the second, the production function is y = k 119 l219 and fixed costs are 1/4. One hundred firms have access to the first technology, but only those hundred can use this technology. An unlimited number of firms have access to the second technology. Assume that the price of kapitose is $.50 no matter how much kapitose is utilized by pfillip producers.
(a) What the long-run industry supply curve for this industry?
(b) Suppose demand is given•by D(p) = 400 - lOOp. What is the long-run equilibrium for this industry?
(c) Suppose demand suddenly shifts to D(p) = 750 - 150p. Work out the short-run, intermediate-run, and new long-run equilibria.
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