A perfectly competitive TV production firm in Lost Angeles faces the following short-run cost schedule: Output 0
Question:
A perfectly competitive TV production firm in Lost Angeles faces the following short-run cost schedule:
Output 0 1 2 3 4 5 6 7 8
Total Cost 10 18 24 30 38 50 66 91 120
The price per unit of output is 16.
a) Calculate the values of average cost (AC), marginal cost (MC) and marginal revenue (MR) for each level of output.
b) What would happen to the price in the long run if this firm were typical of others in the industry?
c) What would happen to costs and revenues if the Canadian government intervened in this market to encourage firms to move production to Vancouver, Canada?
d) While television production is up, the US television station industry is collapsing thanks to the internet and Netflix. To what extend should government intervene in the markets prone to market failure?