Consider an industry with two possible long-run cost functions. There are no quasi- fixed costs in this industry:1=(y^2)/2mc1=yc2=5y2=5 Demand is given by:= 25-x/2 a.What are the supply functions for firms of both types? Find the equilibrium price, quantity, and number of firms of each type in a competitive long-run equilibrium. Is there a long-run equilibrium? b. Suppose the government intervened and limited the number of type 1 firms to be N=. What is the market supply function? Find the equilibrium price and quantity in the market now. What is the aggregate quantity produced by type 1 firms? What is the aggregate quantity produced by type firms?. Suppose now that the government decided to grant a monopoly over this market. What is the monopolist’s marginal revenue function? Note: dP/dx =-1/2. What would the equilibrium price and quantity be for a monopoly of each type?
