I) Consider the market for a particular type of financial service. Assume 1) all firms are identical and 2) it is a perfectly competitive market. Further, assume the industry is a constant cost industry. Each firm’s total cost function is TC = 2q^3 – 30q^2 + 150q. (i) What is the long run equilibrium price and quantity for each firm? (ii) The industry demand function is Qd=10000-10p. How many firms are there in the industry in the long run? (iii) The demand has changed to Qd=6000-4p. How many firms are there in the industry now in the long run?

Consider a competitive industry with a market demand curve of P = 252 - Q, where P is market price and Q is the quantity demanded in the market. Each firm in the industry has a cost function of TC = 196 + q^2, if q > 0 where q is output of the individual firm (TC = 0 if q = 0). The market is initially in long-run equilibrium. The government decides to regulate the industry by issuing licences to all firms currently in the industry. and not to allow any further entry by other firms without a licence. That is, the number of licences is fixed, and entry requires that an existing licence holder sells their licence to the potential entrant, leaving the number of firms producing in the industry fixed. Subsequent to the introduction of this regulation, the market demand curve shifts to P = 432 - Q. What is the value of the licence?

Consider a perfectly competitive market where the demand for the good is given by Q-769-5p, where Q denotes the quantity demanded at price p. On the supply side, the good can be produced by identical firms with U-shaped average cost curves. The total cost of the industry as a function of total output, Q, is given by C(Q) = 5 Q What is the (long run) equilibrium price in this market? (As usual, you must enter a number below, not a ratio, not an expression with symbols..., just a number. Don't round, even if rounding makes sense...)

Suppose that all firms in a constant-cost industry have the following long-run cost curve:c(q) = 4q2 + 100q + 100The demand in this market is given by QD = 1280 - 2p. Suppose the number of firms in the market is restricted to 80a. Derive the supply curve with this restriction. Find the market equilibrium price and quantity with the restriction.b. If firms are allowed to buy and sell these permits in an open market, what will be the rental price of permits? Will firm’s that own permits make profit? Briefly explain.c. How much deadweight loss is generated by the permit system? Provide a graph showing the region of this deadweight loss.d. Suppose the government abandons the permit system and simply imposes a fixed fee on firms in the market. If the fee is set equal to the permit price you found in c., what will be the equilibrium price, quantity, number of firms and deadweight loss?