1) Assume that the market for prawn noodle is perfectlycompetitive and all sellers in the market are identical in thequality and quantity of their prawn noodles. The market supply anddemand curves for the prawn noodle market are as follows: Demandfunction: P = 65-0.01Q and Supply function, P = (1/1200)Q, where Pis measured in dollar ($) and Q indicates quantity of prawnnoodles. The total cost for a typical prawn noodle stall, May’sPrawn Noodle, is TC= 55+(1/20)Q² .

(i) Compute with diagrams the equilibrium market price, theequilibrium market quantity, the profit and quantity of outputsupplied by May’s Prawn Noodle.

(ii) Examine with diagrams the effect of new entry or exit ofprawn noodle sellers on the long-run market equilibrium.