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ChoppinAxe is a small Swedish firm that produces wood planks and operates in a perfectly competitive market. Every firm in the market has the following total cost function:
C(qi) =2304 -20qi +4qi2
where qi represents the tons of wood planks each firm i produces. ChoppinAxe and all other firms sell their products to only one buyer, IPEA, an international furniture company. IPEA's
total demand for wood planks can be described as follows:
D(p) =3448 -4p
where p is the price for a ton of wood planks. You may assume that the market is in equilibrium.
a) Find ChoppinAxe's supply curve.
b) How many tons of wood planks will ChoppinAxe sell to IPEA? At which price?
c) Repeat sub questions (a) and (b) for KindCutters, another wood planks producer present in the market.
FallingTrees is a start-up firm that is considering entering the wood planks market. Along with ChoppinAxe and KindCutters there are another 113 wood plank producers in the market.
d) Should FallingTrees enter the market? Why (not)?
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