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2/ Consider a perfectly competitive market in which there are N firms with the same cost function as follows. $C = 16 + q^2$ a) The average (total) cost is given by: $ATC = \frac{16}{q} + 3q$ b) The marginal cost is given by $MC(q) = 2q$ c) For each firm, the production of 4 goods costs 32 EUR including 16 EUR of variable cost and 16 EUR of fixed cost. d) The breakeven point for each firm on this market is 6 (units of good) e) If the market price is 10 EUR, each firm wants to sell 5 goods. f) The optimal production of a firm with the cost function in the statement is $q^* = 2p$ g) If $N = 3$, the total supply (in the long-run) is equal to $\begin{cases} Q_{tot} = \frac{3}{2}p & \text{if } p \ge 8\\Q_{tot} = 0 & \text{otherwise} \end{cases}$ Marion Dupoux Environmental Policy Instruments - 2018 h) If $N = 2$ and the aggregate demand function is $Q_{tot} = 40 - p$, the market equilibrium is such that $q^* = 20$ and $p^* = 10.$

          2/ Consider a perfectly competitive market in which there are N firms with the same cost function as
follows.
$C = 16 + q^2$
a) The average (total) cost is given by: $ATC = \frac{16}{q} + 3q$
b) The marginal cost is given by $MC(q) = 2q$
c) For each firm, the production of 4 goods costs 32 EUR including 16 EUR of variable cost and
16 EUR of fixed cost.
d) The breakeven point for each firm on this market is 6 (units of good)
e) If the market price is 10 EUR, each firm wants to sell 5 goods.
f) The optimal production of a firm with the cost function in the statement is $q^* = 2p$
g) If $N = 3$, the total supply (in the long-run) is equal to $\begin{cases} Q_{tot} = \frac{3}{2}p & \text{if } p \ge 8\\Q_{tot} = 0 & \text{otherwise} \end{cases}$
Marion Dupoux
Environmental Policy Instruments - 2018
h) If $N = 2$ and the aggregate demand function is $Q_{tot} = 40 - p$, the market equilibrium is
such that $q^* = 20$ and $p^* = 10.$

2/ Consider a perfectly competitive market in which there are N firms with the same cost function as
follows.
C = 16 + q^2
a) The average (total) cost is given by: ATC = (16)/(q) + 3q
b) The marginal cost is given by MC(q) = 2q
c) For each firm, the production of 4 goods costs 32 EUR including 16 EUR of variable cost and
16 EUR of fixed cost.
d) The breakeven point for each firm on this market is 6 (units of good)
e) If the market price is 10 EUR, each firm wants to sell 5 goods.
f) The optimal production of a firm with the cost function in the statement is q^* = 2p
g) If N = 3, the total supply (in the long-run) is equal to Qtot = (3)/(2)p if p ≥ 8
Qtot = 0 otherwise
Marion Dupoux
Environmental Policy Instruments - 2018
h) If N = 2 and the aggregate demand function is Qtot = 40 - p, the market equilibrium is
such that q^* = 20 and p^* = 10.

Added by David T.

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