Assume the ice cream industry is perfectly competitive. each firm producing ice cream must hire an operations manager. there are only fifty (50) operations managers that display extraordinary talent for producing ice cream. there is a potentially unlimited supply of operations managers with average talent. operations managers are all paid $200,000 per year. the long-run total cost (in thousands of dollars) faced by firms that hire operations managers with exceptional talent is ltce = 200 + q2 . q is measured in thousands of gallon tubs of ice cream. the long-run marginal cost function is lmce = 2q. the long-run average cost function is lace = 200/q + q. the long-run total cost faced by firms that hire operations managers with average talent is ltca = 200 + 2q 2 . the long-run marginal cost function is lmca = 4q. the long-run average cost function is laca = 200/q + 2q.

do as many parts as possible.

(a) derive the long-run supply function for the e-firms that have operations managers with extraordinary talent.

(b)what is the long run industry supply curve for e-firms?

(c) derive the long-run supply function for the a-firms that have operations managers with average talent.

(d) find the output that an e-firm produces to reach its long-run minimum cost.

(e) find the output that an a-firm produces to reach its long-run minimum cost.

(f) if the long-run demand function is q d = 8,000 – 100p, what is the longrun equilibrium price in the ice cream market if only e-firms supply the ice-cream?

(g) given your answer in (f), why will the a-firms enter the ice cream market in the long-run.

(h)when the a-firms have finished entry into the market, what will the long-run equilibrium price for ice cream be?

(i) if all e-firms remain in the ice cream market at the price you determined in part (h), how many a-firms will have entered the market?

(j) in the long run, how much profit will each a-firm make at the price you determined in part (h)?

(k) in the long run, how much profit will each e-firm make at the price you determined in part (h)?

(l) why is the difference in profit made by each of the different types firms called "economic rent"? who is making this "economic rent"?