Suppose There Are N Identical Firms in an Industry

question 23

Essay

Suppose there are n identical firms in an industry. Each firm's variable cost is $1 and fixed cost is $0.04. The firms compete in quantities. The inverse demand function of this industry is p = 2 - (y₁ + y₂ + ... + y_n)
i)Suppose that the number of firms, n, is fixed. What is the output level of each firm in equilibrium? What are the equilibrium price and profits per firm?
ii)If there is free entry into the industry, what will be the long- run equilibrium number of firms?

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Definitions:

Marxist Theory

A sociopolitical and economic theory developed by Karl Marx that critiques capitalism and advocates for a society where workers own the means of production.

Erik Olin Wright

was a sociologist known for his work on class structures, social stratification, and egalitarian alternative futures within capitalist societies.

Empirical Application

The use of empirical methods, including observation and experimentation, to apply theories or hypotheses in real-world settings.

Marxian Concepts

Ideas and theories developed by Karl Marx that address issues related to social class, economic systems, and the dynamics of capitalism and class struggle.