1. Consider a perfectly competitive market with a price of $21, where each firm has a cost function of c(q) = 10+q+q². a) Is the market in long-run equilibrium? Explain why or why not. b) What is the value to a firm of a cost-saving process innovation that reduces the cost function to c(q) = 5 +0.5q²? c) Illustrate this innovation graphically using a well-labeled diagram.

1. Consider a perfectly competitive market with a price of $21, where each firm has a cost function of c(q) = 10+q+q². a) Is the market in long-run equilibrium? Explain why or why not. b) What is the value to a firm of a cost-saving process innovation that reduces the cost function to c(q) = 5 +0.5q²? c) Illustrate this innovation graphically using a well-labeled diagram.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter12: Firms In Perfectly Competitive Markets

Section: Chapter Questions

Problem 9P

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