Suppose the industry producing good x is perfectly competitive, and good x can be produced only in integer quantities; i.e.you can't produce fractions of units.Each firm only uses labor as an input, and the marginal product of labor is diminishing throughout.a.
a.Draw marginal and average cost curves for a firm in this industry.
b.In a perfectly competitive equilibrium in which X* unit are sold at price p*, how many firms are operating?
c.Now suppose there is a recurring fixed cost FC.How does that change your picture from part (a)?
d.How does firm output, industry output, equilibrium price and the number of firms in the industry change as FC increases assuming the market continues to be perfectly competitive?
e.In what sense might it become unreasonable to assume competitive (i.e.price-taking) behavior as FC gets large? If firms were to "think strategically" and price is the strategic variable, what happens to profit as FC increases?
f.How would your answers to (d) and (e) change if firms produced different varieties of x?
g.What is the highest possible FC that would result in x still being produced (assuming no firm can ever price-discriminate)? Assume market demand is linear and illustrate the firm's cost curves, output quantity and price.

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The Answer of Suppose the industry producing good x is perfectly competitive, and good x can be produced only in integer quantities; i.e.you can't produce fractions of units.Each firm only uses labor as an input, and the marginal product of labor is diminishing throughout.a.
a.Draw marginal and average cost curves for a firm in this industry.
b.In a perfectly competitive equilibrium in which X* unit are sold at price p*, how many firms are operating?
c.Now suppose there is a recurring fixed cost FC.How does that change your picture from part (a)?
d.How does firm output, industry output, equilibrium price and the number of firms in the industry change as FC increases assuming the market continues to be perfectly competitive?
e.In what sense might it become unreasonable to assume competitive (i.e.price-taking) behavior as FC gets large? If firms were to "think strategically" and price is the strategic variable, what happens to profit as FC increases?
f.How would your answers to (d) and (e) change if firms produced different varieties of x?
g.What is the highest possible FC that would result in x still being produced (assuming no firm can ever price-discriminate)? Assume market demand is linear and illustrate the firm's cost curves, output quantity and price.

Suppose the Industry Producing Good X Is Perfectly Competitive, and Good