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At Home country, the industry of canned tomato is a monopolistically competitive industry where all firms are identical, except for the fact that they produce
At Home country, the industry of canned tomato is a monopolistically competitive industry where all firms are identical, except for the fact that they produce slightly different varieties of canned tomato. When the firms in this industry increase production by one unit, their total cost increases by $12, irrespective of the total quantity of production. At zero production, the firms in the industry would incur a total cost of $3,000. a. (4 marks) Now assume that each firm in the industry has the same market share, so the quantity of tomato cans that each firm produces () is equal to the total sales in the market () divided by the number of participating firms (). Total sales in the market () are equal to $30,000. Derive the firms' average cost to show that the average cost curve (CC) is given by: Curve: b. (2 marks) The demand side of the canned tomato market is represented by the following curve, which summarises price competition in the industry. Curve: Illustrate the curve and the curve on a graph with price and cost on the vertical axis, and the number of firms on the horizontal axis. Solve for the market equilibrium at Home in autarky, that is, find the equilibrium number of producers and the equilibrium price of canned tomato
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