Assume the Market for Tortillas Is Perfectly Competitive

Essay

Assume the market for tortillas is perfectly competitive. The market supply and demand curves for tortillas are given as follows:
Supply curve: P = .000002Q
Demand curve: P = 11 - .00002Q
The short run marginal cost curve for a typical tortilla factory is:
MC = .1 + .0009Q
a. Determine the equilibrium price for tortillas.
b. Determine the profit maximizing short run equilibrium level of output for a tortilla factory.
c. At the level of output determined above, is the factory making a profit, breaking-even, or making a loss? Explain your answer.
d. Assuming that all of the tortilla factories are identical, how many tortilla factories are producing tortillas?