Part I – Problem SolvingConsider the Perfectly Competitive Market for dog shampoo which, in the short run, is served by 100 identical firms. Each of these firms faces the following total cost function C(q) = q2+ 8q+36.Determine the individual firm’s Marginal Cost, Averaged Cost and Average Variable Cost functions, and use this to calculate industry supply.Given that the industry demand curve is given by Q(p) = 1600 – 50p, calculate the market clearing price and output.Is this market in long-run equilibrium? Why or why not?A market is supplied competitively by 50 low-cost firms, each with cost curve Cl(q)=350+2q+q2 and n high-cost firms, each with cost curve Ch(q)=400+2q+q2. Market demand is Q=2500-10p. If none of the high-cost firms makes a positive profit, how large is n? How much profit do the low-cost firms make?List the assumptions of the perfect competition model and describe how the voilation of each assumption might move an industry away from maximum efficiency and/or the price away from marginal cost.
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