Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The market for chocolate covered macadamias is characterised by demand Qa = 300 - p. Initially, there are only 10 firms selling chocolate covered macadamias,

image text in transcribed
The market for chocolate covered macadamias is characterised by demand Qa = 300 - p. Initially, there are only 10 firms selling chocolate covered macadamias, and strict barriers to entry prevent any new firms from entering the market. Each has costs given by c(q) = q2 + 4 for q > 0 and c(q) = 0 for q = 0. If rounding is needed, please round your answers to 3dp. a) If all 10 firms behave like price- takers, what will be the price of chocolate covered macadamias? b) Now barriers to entry are lifted, and any number of identical firms (with the same cost structure) can enter. How many new firms (i.e. not counting the original 10) will have entered when the market is in long run equilibrium? c) Now suppose a new type of firm with a new technology for producing chocolate covered macadamias arrives on the scene. Each of these new firms has costs given by c(q) = q2 + 1 for q > 0 and c(q) = 0 for q = 0. If there are no barriers to entry or exit for either the old or new firms, in the long run equilibrium, how many of the new firms will be operating in the market? d) How many of the old firms (with the original cost structure) will be operating in the market

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_2

Step: 3

blur-text-image_3

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

The Rise And Fall Of Neoliberal Capitalism

Authors: David M Kotz

1st Edition

0674725654, 9780674725652

More Books

Students also viewed these Economics questions