Exercise 1. (18 points) Suppose there are n identical firms in a market in long-run. Each firms cost function is given by C = 32 + 0.5q 2 , where q is the amount that an individual firm produces. This means that an individual firms marginal cost is given by MC = q. Also, the market demand is given by P = 96 ? 2Q, where Q is the total amount of the good produced by all of the firms combined. Therefore, Q = n · q.

(a) How much output will each of them produce?

(b) What will be the market price?

(c) How many firms operate in long run? That is find n.

(d) What is the value of consumer surplus?

(e) What is the individual firms supply curve?

(f) What is the market supply curve?