Suppose That the Market for Gourmet Deli Sandwiches Is Perfectly

question 31

Essay

Suppose that the market for gourmet deli sandwiches is perfectly competitive and that the supply of workers in this industry is upward-sloping, so that wages increase as industry output increases. Delis in this market face the following total cost:
where Q is the number of sandwiches and W is the daily wage paid to workers. The wage, which depends on total industry output, equals
, where N is the number of firms. Market demand is
.
a. Find the long-run equilibrium output for each firm.
b. How does the long-run equilibrium price change as the number of firms increases?
c. Find the long-run equilibrium number of firms and total industry output.
d. Find the long-run equilibrium price.

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Definitions:

Physical Strength

Refers to the maximum amount of force that a muscle or group of muscles can exert in a single effort.

Median

A statistical measure representing the middle value in a set of data, dividing it into two equal halves.

Distribution of Scores

The way in which a set of scores is spread out across the possible values, which can be depicted in a graph.

Correlation Between Two Variables

A measure indicating the extent to which two variables change together, showing the strength and direction of their relationship.