Can someone help me with this question with explanations Sup

Can someone help me with this question with explanations?

Suppose each firm in the market for giant cookies (y) has an identical cost functiorn 1. Suppose market price of giant cookies is p 60. How much will a firm produce in a perfectly competitive market? Find the profit for a firm with this cost function. 2. Should we expect entry into or exit from this market if p 60? 3. How much output will each firm produce in equilibrium in the long run? At what price will firms earn exactly zero profit at this level of output? 4. Suppose the market demand function for ? is given by Qd-492-4p, How many firms will operate in this market in the long run? Explain whether or not perfect competition a reasonable model for a market with this many firms. 5. What will consumer surplus, producer surplus, and total welfare be in the long run equilibrium? (Note: Market Supply is Q,- 100 12 p-100) ?. Suppose an Increase în rent for Industrial kitchens changes the cost function for each firm to c(y) - 96 12y 6y2. Show graphically how the change in cost function changes the short and long run market equilibrium price and quantity. (set up cost curves and supply and demand graph side by side) 7. Find the new market equilibrium price, auantitv, consumer surplus, producer surplus, and total welfare be with the new cost function. (Q,- 63)s) 312 8. How many firms will exit the market due to the cost increase?

Solution

Marginal cost (MC) = dc(y)/dy = 12 + 12y

Average cost (AC) = c(y)/y = (54/y) + 12 + 6y

(1) In perfect competition, firm will equate market price with MC.

12 + 12y = 60

12y = 48

y = 4

Total revenue (TR) = p x y = 60 x 4 = 240

Total cost (TC) = c(y) = 54 + (12 x 4) + (6 x 4 x 4) = 54 + 48 + 96 = 198

Profit = TR - TC = 240 - 198 = 42

(2) Since economic profit is positive, we should expect entry since there are no barriers to entry and exit.

(3) In long run, Price = MC = AC

12 + 12y = (54/y) + 12 + 6y

6y = 54/y

y² = 9

y = 3

Price = MC = 12 + (12 x 3) = 12 + 36 = 48

(4) Substituting value of price in market demand function,

Qd = 492 - (4 x 48) = 492 - 192 = 300 (Market output)

Number of firms = Market output / Firm output = 300 / 3 = 100

Since number of firms is large, perfect competition is a reasonable market model.

NOTE: As per Chegg Answering Policy, first 4 parts are answered.