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Assume that the widget industry is competitive. Firms in the industry use only one input and the typical firm’s long run cost function is C(w,q) = wq2 + 20w , where w denotes the wage and q the firm’s output. The market demand function is D(p) = max{A-Bp,0} where p is the market price and A,B > 0.
The supply function for the one input used in the production of widgets is S(w) = 10w. Determine the long run equilibrium market price and quantity given the market demand for widgets.
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