Demand for microprocessors is given by P = 35 – 5Q , where Q is the quantity of microchips (in millions). The typical firm’s total cost of producing a chip is Ci = 5qi­, where qi is the output of firm i. a) Does the typical microchip firm display increasing, constant, or decreasing returns to scale? What would you expect about the real microchip industry? In general, what must be true about the underlying technology of production for competition to be viable?

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