1. Consider a perfectly competitive market with a price of $12, where each firm has a cost function of c(q) = 50 + 2q + 0. 5q². 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) = 10 + 0.5q? c) Illustrate this innovation graphically using a well-labeled diagram.

1. Consider a perfectly competitive market with a price of $12, where each firm has a cost function of c(q) = 50 + 2q + 0. 5q². 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) = 10 + 0.5q? c) Illustrate this innovation graphically using a well-labeled diagram.

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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