Question

2. (9 points) Suppose there are n identical firms in a market. Each firm’s cost function is given byC =

648 + 8q^2, where q is the amount that an individual firm produces. This means that an individual firm’s

marginal cost is given by MC = 16q. Also, the market demand is given by P = 306 – 3Q, where Q is the

total amount of the good produced by all of the firms combined. Therefore, Q = n*q.

a) How much output will each firm produce?

b) What will be the market price?

c) How many firms will there be in long run equilibrium?

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