The demand for bread per day in a village is: QD = 240 – 4P
a) There are many bakeries, each of which has costs given by: TCA = 200 + 0.5q2(in ¢)What is the quantity each bakery produces, the market’s equilibrium price and quantity,the number of bakeries in operation, and the market’s long run supply function?
b) One of the bakeries invents a new process which costs: TCB = 1500 + 5qWhat happens to price, the market and the firm’s quantities, and the number of bakeries?c) Now the village council issues an annual license to just one firm, which can operate asmany bakeries with costs given by TCA as it desires. What is the new price, quantity forthe firm and each bakery, and number of bakeries in operation? What is the firm’ssupply function, and why? What should this license cost?
d) Distinguish between the market structures in each of the cases above; which is best forthe consumer? Distinguish between the role of a bakery in each market structure: does itrepresent just the plant, the plant and the firm, or the plant, the firm, and the industry?[Hint: consider how many bakeries there are in each firm and in the entire industry.]