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(2) Would you expect to see entry into or exit from the industry in the long-run? Explain. What effect will entry or exit have on market equilibrium? (2)解： Entry because the firms in the industry are making positive profit. As firms enter, the supply curve for the industry will shift down and to the right and the equilibrium price will fall, all else the same. This will reduce each firm’s profit down to zero until there is no incentive for further entry. (3) What is the lowest price at which each firm would sell its output in the long run? Is profit positive, negative, or zero at this price? Explain. (4) 错题目 What is the lowest price at which each firm would sell its output in the short run? Is profit positive, negative, or zero at this price? Explain. 例题6 例题7 例题8 Consider a city that has a number of hot dogs stands operating throughout the downtown area. Suppose that each vendor has a marginal cost of $1.50 per hot dog sold, and no fixed cost. Suppose the maximum number of hot dogs any one vendor can sell in a day is 100. (1) If the price of a hot dog is $2, how may hot dogs does each vendor want to sell? Since marginal cost is equal to 1.5 and the price is equal to 2, the hot dog vendor will want to sell as many hot dogs as possible, or in other words, 100 hot dogs. (2) If the industry is perfectly competitive will the price remain at $2 for a hot dog? If not, what will the price be? The price should fall to $1.50 so that price is equal to marginal cost. Each hot dog vendor will have an incentive to lower the price of a hot dog below $2 so they can sell more hot dogs than their competitors. No hot dog vendor will sell a hot dog for a price below marginal cost, so the price will fall until it reaches $1.50. (3) If each vendor sells exactly 100 hot dogs a day and the demand for hot dogs from vendors in the city is Q=4400-1200P, how many vendors are there? If price is 1.50 then Q=4400-1200*1.5=2600 in total. If each vendor sells 100 hot dogs then the