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Lucky Cookies is one of the 100 firms in the market for cookies in Country YY. The equilibrium price and equilibrium quantity of cookies
Lucky Cookies is one of the 100 firms in the market for cookies in Country YY. The equilibrium price and equilibrium quantity of cookies is $50 per pack and 10,000 packs respectively in this market. Assume that all firms earn negative economic profit while the average total cost is $55 and the average variable cost is $30 for each pack of cookies. (a) Draw a set of market-firm diagram to illustrate the above situation in the market for cookies in Country YY. Label the critical points with the given figures. No explanation is needed. (b) Suppose that the Government of Country YY offered a one-off subsidy for all the firms in the market of cookies in the last quarter. As a result, the fixed cost of all the firms in this market has been decreased in which all the firms could attain a status of zero profit. Illustrate the effects in the same diagram of part (a). No explanation is needed.
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