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    Equilibrium Price

    Industry demand is given by:

    QD = 1000 - P

    All firms in the industry have identical and constant marginal and average costs of $50/unit

    a. If the industry is perfectly competitive, what will industry output be? What will be the equilibrium price? What profit will each firm earn?

    b. Now suppose that there are five firms in the industry, and that they collude to set price. What price will they set? What will be the output of each firm? What will be the profit of each firm?

    Please show calculations as this is very helpful for me. Thank you

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    Solution Preview

    a. If the industry is perfectly competitive, what will industry output be? What will be the equilibrium price? What profit will each firm earn?

    The long run equilibrium price for a perfectly competitive market is equal to the minimum average cost. Therefore, P = $50 in this ...

    Solution Summary

    Each firm's output and profits are computed.

    $2.49

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