# What is the firms demand function in this freely competitive market?

A firm operates in an industry whose market structure is that of free competition with barriers to e Show more A firm operates in an industry whose market structure is that of free competition with barriers to entry. the industrys demand is XI=4200001-10000Px and the industru supply is XI=1+20000Px The cost function of the firm is C(Xf)=05Xf 2 +4 where XI is the industry quantity and Xf is the firms quantity. a. Find the industry output and price. b. What is the firms demand function in this freely competitive market? Explain why the firms price and its MR are identical? c. Find the firms supply function assuming for simplicity that the firms supply function is given by its MC above its Average cost. Using this supply function find out what is the optimal quantity that the firm should produce and what is the firms profit? d. Assuming that the firm has a Cobb Douglas Production function Xf=AK a L B . Is it possible that the sum a + B will be greater or equal to 1? (Hint. Think about the implication on the MC of the firm. Assume that the price for hiring unit of K or L is fixed. Do not engage in complex computation. the question is essentially mostly a qualitative one). consider your answer to 2. above. Show less

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