Q: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q - Firm B TC = 10 + 2Q -(1) --(2) Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000. Explain the relationship between the zero-profit curve and the marginal cost curve for the two firms using the quantity schedule of the two firms and the relevant plots of equations (1) and (2). Use the plots in Q 1(a) and plots of isoprofit curves valuing Rs. 34,000 and Rs. 60,000 for the two firms to identify any differences in the shape of the two firms' isoprofit curves. Can you provide an explanation for any differences that may exist? . Use the information on both firms to assess whether the higher isoprofit curves would always get closer to the average cost curve as quantity increases. Explain why or why not.

Q: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q - Firm B TC = 10 + 2Q -(1) --(2) Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000. Explain the relationship between the zero-profit curve and the marginal cost curve for the two firms using the quantity schedule of the two firms and the relevant plots of equations (1) and (2). Use the plots in Q 1(a) and plots of isoprofit curves valuing Rs. 34,000 and Rs. 60,000 for the two firms to identify any differences in the shape of the two firms' isoprofit curves. Can you provide an explanation for any differences that may exist? . Use the information on both firms to assess whether the higher isoprofit curves would always get closer to the average cost curve as quantity increases. Explain why or why not.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.9P

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The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a purely competitive firm that produces novelty ear buds. Assume the market for novelty ear buds is a competitive market and that the price of ear buds is $6.00 per pair. Buddies Production Costs Quantity MC ATC of Ear Buds ($) ($) 25 2.20 30 2.02 2.17 35 2.45 2.21 40 3.57 2.38 45 4.00 2.56 50 5.46 2.85 55 5.93 3.13 60 8.53 3.58 Instructions: In part a, enter your answer as the closest given whole number. In parts b-d, round your answers to two decimal places. a. If Buddies wants to maximize profits, how many pairs of ear buds should it produce each week? pairs b. At the profit-maximizing quantity, what is the total cost of producing ear buds?