Suppose that the demand for skateboard is given by
and that the long-run total operating costs of each skateboard manufacturer in a competitive industry are given by
Entrepreneurial talent for skateboard manufacturing is scarce. The supply curve for entrepreneurs is given by
where w is the annual wage paid.
Suppose also that each skateboard manufacturer requires one (and only one) entrepreneur (hence the quantity of entrepreneurs hired is equal to the number of firms). Long-run total costs for each firm are then given by
a. What is the long-run equilibrium quantity of skateboards produced? How many skateboards are produced by each firm? What is the long-run equilibrium price of skateboards? How many firms will there be? How many entrepreneurs will be hired, and what is their remuneration?
b. Suppose that the demand for skateboards shifts outward to
How would you now answer the questions posed in part (a)?