The town of Whoville has 100 identical consumers and 50 identical car washes. Each consumer has an income of $24. The diagram and chart below show the indifference curves of a typical consumer and the marginal cost curve of a typical car wash.

Quantity MC
1 ............ $3
2 ............ 4
3 ............ 5
4 ............ 6
5 ............ 7
6 ............ 8
7 ............ 9
8 ............ 10
FIRM€™S MARGINAL COSTS
a. What is the price of a car wash today?
b. Suppose that in the long run there is no entry or exit from the car wash industry.
What can you conclude about the fixed costs at an individual carwash?

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All Other Goods Car Washes 1 2 3 4 12 CONSUMER'S INDIFFERENCE CURVES