Question: Consider a perfectly competitive industry where individual firms have total cost functions given by,

TC(q) = 0.01q ² +100

1. Does an individual firm have (i) economies of scale, (ii) diseconomies of scale, (iii) economies of scale up to some threshold quality q* and decreasing economies of scale thereafter? If (iii) is true, compute q*.
2. A perfectly competitive industry is characterized by the above cost function for individual firms and by demand function:

D(p) = 10, 000 — 100p

Compute the long-run equilibrium price, quantity, and number of firms in the market.

Price: $2.99

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