2. Firm I has variable cost VCi = yi^2/10 and fixed cost FCi =2000.
(1) Find total cost Ci(yi), average cost ACi, marginal cost Mciand the firm supply function Si(p)
(2) There are n=50 firms identical to firm I, facing a marketdemand of D(p) = 1000-250p. Find the market supply function S(p),the market equilibrium price p*, the market equilibrium quantityY*.
(3) Given price p* you found in part b, what is the profitmaximising yi* that firm i produces? How much profit does firm imake?
(4) The government introduces a tax on demand so that D'(p ) =1000-250(p+t), where t=8. What is the new equilibrium price p? Whatis the new market equilibrium quantity Y'?
(5) At the new market price p', and assuming that in the shortrun the number of firms remains n=50, how much will firm I produceand how much will profit be?
(6) Given what you found in part e, will firms enter or exit?What is the long-run equilibrium number of firms n? What is thelong run equilibrium price?
