1) Short run market equilibrium Consider a market with 26 small producers, each with supply function: 𝑞𝑠 = 𝑃 + 5 𝑖𝑓 𝑃 > 10, 𝑞𝑠 = 0 𝑖𝑓 𝑃 < 10, 𝑞𝑠 = 0 or 15 𝑖𝑓 𝑃 = 10,

a) Write down the market-level supply function 𝑄𝑆(𝑃) b) If demand in the market is given by 𝑄𝐷 = 850 − 10𝑃, find the equilibrium price and quantity in the market c) Draw two graphs: one at the firm level and one at the market level. On both graphs, indicate the quantity produced and shade in producer surplus. On the market-level graph, draw the demand curve as well. d) Calculate producer surplus at both the individual and market level. e) Now suppose market demand drops to 𝑄𝐷 = 400 − 10𝑃. Once again, find quantities and producer surplus (individual and market level) 2) Long run market equilibrium Consider a market with small, identical, price-taking firms, each of which has long run total cost: 𝑇𝐶 = 3𝑞2 + 3 4 . a) Calculate marginal and average costs. What is each firm’s exit price, and what is the minimum quantity each would be willing to supply? b) Find the long-run equilibrium price if this market is perfectly competitive. c) If market demand is given by 𝑄𝐷 = 10 − 𝑃, how many firms will this market have in the long run perfectly competitive equilibrium? d) If demand for this product increases to 𝑄𝐷 = 23 − 𝑃, how many more firms will enter the market? e) Find the firm-level supply function 𝑞𝑠(𝑃). Did you need to find it before now?