Derive the output level and the average total cost

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Reference no: EM132192636

Question: Consider an industry where there are 10 low cost firms each with a total cost function of C(q) = 10q + 4q2 + 144 and a potentially infinite number of high cost firms with a total cost function of C(q) = 10q + 4q2 + 324. Assume that these firms compete competitively. All firms operate at the most efficient scale.

i) Derive the output level and the average total cost where average total cost is minimized for each firm type. This is the exit price of each firm type.

ii) Draw the long run supply curve for the industry labeling all kink points, and axes.

iii) Suppose that the industry demand is given by Q(P) = 100 - P. What is the equilibrium price, industry quantity?

iv) How many low cost firms operate and how many high cost firms operate? What are their profits?

Reference no: EM132192636

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