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I know that A is 10 - 0.001q. And B should be MC = 10 - 0.002q.. Consider an industry in an urban area that

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I know that A is 10 - 0.001q. And B should be MC = 10 - 0.002q..

image text in transcribed
Consider an industry in an urban area that is subject to localization economies. The industry faces the demand curve p = 59 0.05 Q , where P is price and Q is the output of the industry. Each rm in the industry has an average cost mction of ac = 10 0.001Q. The rms in the industry behave as competitive rms. a. What is the average cost function of the industry? b. What is the marginal cost function of the industry? 0. What is the output level that this competitive industry would produce in the absence of any bribes or subsidies? What is the difference between average cost and marginal cost at this output level? d. What output level would be produced if there were no localization economy for the industry? (Hint: The coefficient Q in the average cost function is zero.)

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