Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

7. Suppose that a market currently can be described as approximating purely competitive conditions and is in long run equilibrium. The existing price for

image text in transcribed

7. Suppose that a market currently can be described as approximating purely competitive conditions and is in long run equilibrium. The existing price for the product is $700 and total market output is 5,000. Now suppose Declan comes up with a new technology in which economies of scale exist up to a total sales volume of 5,000 units. If the long-run total cost function associated with his new technology is given by TC = 1,000Q - 100Q +5Q (Q's are in units of 1,000) and if the firm earns an economic profit equal to 20 percent of its (lowest possible)cost at equilibrium, a) what will the price of the product become if the industry becomes monopolized? b) Suppose he wants to produce as a perfect competitor. Determine and calculate the price and output for that situation.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Understanding Business Ethics

Authors: Peter A. Stanwick, Sarah D. Stanwick

3rd Edition

1506303234, 9781506303239

More Books

Students also viewed these Accounting questions

Question

What is an access control list?

Answered: 1 week ago