Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please answer parts f-i only We are working with a firm in a software industry with low startup costs and a relatively small maximum market

Please answer parts f-i only

We are working with a firm in a software industry with low startup costs and a relatively small maximum market size (something like a business-to-business web product). The fixed costs are $500,000 and maximum market size is 10,000 clients. The demand elasticity parameter is 1/1250 and marginal costs are $15,000. a. Find the AC curve for this industry. b. Find the Price curve for this industry. c. Graph these curves on the same axis. Label all incepts and slopes. d. Find the maximum number of firms this industry can support. e. What is the price these firms will charge? f. How can we use this approach to determine whether to make an acquisition in this industry? g. Now imagine we open trade with a country with a market size of 9,600. Find the new maximum number of firms and price? h. How does opening to trade benefit consumers? i. Which firms are likely to benefit from this shift to trade? Who might be worse off? Why?

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

How The Old World Ended The Anglo-Dutch-American Revolution 1500-1800

Authors: Jonathan Scott

1st Edition

0300249365, 9780300249361

More Books

Students also viewed these Economics questions

Question

1. Information that is currently accessible (recognition).

Answered: 1 week ago