Question
Suppose the total demand for specialty coffee per hour in Ruston is Q = 640 - 80P. There are six (n=6) monopolistically competitive firms
Suppose the total demand for specialty coffee per hour in Ruston is Q = 640 - 80P. There are six (n=6) monopolistically competitive firms currently in the market selling some variety of specialty coffee, each with total cost curves given by: TC=20+q, +0.0125q a. Find the proportional demand faced by one coffee shop, denoted Firm i. That is, suppose the firms have equal market share and determine the demand function for a single firm. b. Calculate the optimal quantity produced by Firm . c. Calculate Firm i's profits. Will there be entry or exit by other coffee shops over time? d. Provide a generic graph the long-run outcome for Firm i given your prediction from (c). Label curves, axes, and intersection points.
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Management and Cost Accounting
Authors: Colin Drury
8th edition
978-1408041802, 1408041804, 978-1408048566, 1408048566, 978-1408093887
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