Determining Rent in a Market with Low-Cost and High-Cost Firms Suppose firms in a competitive market for house paints have the cost function C(q)=8+2q+2q?. The market is in a long-run equilibrium. (a) What is the price of house paint? (b) Suppose a subset of the firms in the market have developed technology that reduces their costs by 50% at any output level. That means these low-cost firms have the cost function C(q)=4+q+q?. How much additional profit do these low-cost firms earn from the technology? (c) Suppose over time, more and more firms adopt the lower-cost technology. What will be the price of paints in the long run?

Determining Rent in a Market with Low-Cost and High-Cost Firms Suppose firms in a competitive market for house paints have the cost function C(q)=8+2q+2q?. The market is in a long-run equilibrium. (a) What is the price of house paint? (b) Suppose a subset of the firms in the market have developed technology that reduces their costs by 50% at any output level. That means these low-cost firms have the cost function C(q)=4+q+q?. How much additional profit do these low-cost firms earn from the technology? (c) Suppose over time, more and more firms adopt the lower-cost technology. What will be the price of paints in the long run?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter2: Mathematics For Microeconomics

Section: Chapter Questions

Problem 2.2P

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