Suppose that all firms in a given industry have the same supply curve given by S_i(p)= 2p when p is greater than or equal to $2 and S_i(p)= 0 when p is less than $2.Suppose that market demand is given by D(p)= 12 - p.If firms continue to enter the industry so long as they can do so profitably, the equilibrium price must be closest to

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To find the equilibrium price, we need to find where the market demand curve intersects with the industry supply curve. Since all firms have the same supply curve, we can find the market supply curve by multiplying the industry supply curve by the number of firms in the market, which we can call N. When p is greater than or equal to $2, S_i(p)F1F1F1S1F1F1F10 2p * N = F1F1F1S1F1F1F10 2Np When p is less than $2, S_i(p)F1F1F1S1F1F1F10 0 * N = 0 We want to find the value of N such that the market supply curve intersects with the market demand curve: 12 - p = 2Np 12 = (2N+1)p If p is less than $2, then the market supply is 0, so we need to find the value of p such that the market demand is 0: 12 - p = 0 p = 12 So the equilibrium price is $12 if the market has fewer than 6 firms. If the market has 6 or more firms, then the equilibrium price is: 12 = (2N+1)p 12/(2N+1) = p The condition for profit is: p > min(S_i(p)F1F1F1S1F1F1F10 2p, S_i(p)F1F1F1S1F1F1F10 0) p > 2N So profit is possible when p is greater than $2N. Thus, the lowest possible value of p that allows for profit is $2N. Setting $2N equal to the equilibrium price given by the market demand curve: 12 = (2N+1)(2N) 12 = 4N^2 + 2N 4N^2 + 2N - 12 = 0 N^2 + N/2 - 3 = 0 (N+3/2)(N-1/2) = 0 Therefore, N can be 1/2 or -3/2. Since N must be a positive integer representing the number of firms, the only possible value for N is 2. When N = 2, the equilibrium price is: 12/(2N+1) = 12/5 = $2.40 Therefore, the closest choice is C, $2.40.

Suppose That All Firms in a Given Industry Have the Same