Crazy Horse Is One of Many Identical Competitive Firms Producing

Essay

Crazy Horse is one of many identical competitive firms producing horse shoes. Its cost function is given by C(Q)
= Q² + 4, where Q is the number of horse shoes produced.
i)Give an equation for and graph the horse shoe industry long run supply curve.
ii)Suppose the demand for horse shoes is given by Q = D(p)= 5000 - 500p. Graph the demand curve. Find the equilibrium price and quantity of horse shoes.
iii)Bowing to pressure from the horse ranchers lobby, the government decides to impose a $1 per unit tax on horse shoes. What is the effect of the tax on the price paid by consumers and the equilibrium quantity?