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uppose the market for e-cigarettes consists of two types of firms: 100 firms of type A and 30 firms of type B. Each type A
uppose the market for e-cigarettes consists of two types of firms: 100 firms of type A and 30 firms of type B. Each type A firm has a total cost T CA = 0.25q2 25. Each type B firm has a total cost T CB = 0.05q2 25. Type B firms have fixed costs which are sunk, but type A firms have costs which are fully avoidable. The aggregate demand is QD (p) = 2, 400 300p. (a.) What is the equilibrium price in this market? (b.) At this price, how much does each type A firm produce, and how much does each type B firm produce? (c.) How much profit does each type of firm make in equilibrium? (d.) Repeat answers (a.) through (c.) for the demand curve QD (p) = 5, 000 500p. Page 1 of 3
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