What is the long run equilibrium price for the type of tiles that Art-tile produces? Why? How many companies will produce this type of tile in long run equilibrium?
What is the long run equilibrium price for the type of tiles that Art-tile produces? Why? How many companies will produce this type of tile in long run equilibrium?
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.10P: Inverse elasticity rule Use the first-order condition (Equation 15.2 ) for a Cournot firm to show...
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Art-tile operates in a market where there are a number of competitors and anyone could set up at operation like Art-tile by making the same initial financial commitment as Art. QM is the market demand for tiles and is described by the following demand curve;
Tiles | Workers | ATC | MC | TC | Revenue | |
1000 | 10 | 8 | 20 | 8 | 22000 | 9000 |
2000 | 19 | 8 | 13.6 | 7.2 | 50000 | 18000 |
3000 | 27 | 7 | 11.2 | 6.4 | 93000 | 27000 |
4000 | 34 | 7 | 9.8 | 5.6 | 148000 | 36000 |
5000 | 41 | 7 | 9 | 5.6 | 217000 | 45000 |
6000 | 48 | 6 | 8.4 | 5.6 | 300000 | 54000 |
7000 | 58 | 7 | 8.3 | 8 | 418000 | 63000 |
8000 | 70 | 7 | 8.5 | 9.6 | 572000 | 72000 |
P = 40 - .0001QM
- What is the long run
equilibrium price for the type of tiles that Art-tile produces? Why?
- How many companies will produce this type of tile in long run equilibrium?
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