Question
The gadget industry has four firms. All the firms have constant marginal cost, MC = 9 and their fixed cost is zero. The market demand
The gadget industry has four firms. All the firms have constant marginal cost, MC = 9 and their fixed cost is zero. The market demand for gadgets is G = 400 40P, where G is the quantity of gadgets and P is the price of the gadgets.
a. If P = 8.5, how much would a firm would produce?
b. In a short-run equilibrium, it is possible to have an equilibrium price such that P > 9? Why or why not?
c. Assume that, in a short-run equilibrium, all the firms produce the same amount. What is the equilibrium price? What is the total supply? How much does an individual firm produce?
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Managerial Economics and Business Strategy
Authors: Michael R. baye
7th Edition
978-0073375960, 71267441, 73375969, 978-0071267441
