Marginal and average cost, Managerial Economics

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In the city of Gelato the market for ice cream is perfectly competitive. Aggregate demand for ice cream is:

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where p is the price for one cone of ice cream. All ice cream producers in the city have the similar total cost function:

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where Qi  represents the number of ice cream cones firm i makes. Suppose that the market is in equilibrium.

a) Derive the firms' marginal and average cost. 

b) Compute price and quantity in equilibrium.

 

 

 


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