In 2010, the binder industry was perfectly competitive. The market demand curve for binders was:
QD=3172-42P where P was the price of a binder (in dollars per binder) and Qp was the quantity of binders demanded per month. The market supply curve for binders was:
Qs 100+150P where Qs was the quantity of binders supplied per month.
a) Solve for the short run equilibrium price and output of binders (show your work).
b) If a representative binder seller has long-run total cost given by: TC= 1 + 2q +0.0625q² where q is the monthly output of the individual binder seller, what is the long-run, profit maximizing level of output of this firm? Explain your answer. Hint: In the long run, firms produce where ATC is at a minimum.
c) What is the long-run equilibrium price charged in the market for binders?
d) What is the long-run equilibrium output of the binder industry?(Hint: Assume that the firms will meet the demand at the long run price.)
e) Approximately how many binder sellers will there be in the long-run equilibrium (round your answer to the nearest whole number)?
