The market demand for chocolate is given by: Q =20-P The chocolate market is per

Question

The market demand for chocolate is given by: Q =20-P

The chocolate market is perfectly competitive and there are 16 firms in the short run.
8 of them have a total cost function of:

C1 (q) = 2 · q^2

while the other 8 have a total cost function of:

C2 (q) = 4 · q^2

Calculate the equilibrium price and quantitiy in the chocolate market.
How much does a firm of each type produce? Calculate the consumer and producer surplus? What is the producer surplus for an individual firm of each type?

Explanation / Answer

Q = Q =20-P equilibrium price and quantitiy in C1 (q) = 2 · q^2 equilibrium price and quantitiy at equilibrium q demanded = q supplied => (2 · q^2)p=q similarly for other 8 firms

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