Exercise 2.7 (P&R, chap. 8, p. 326: Exercise12) A number of stores offer film developing as a service to their customers. Suppose that each store offering this service has a cost function C(q) = 50+ 0.5q + 0.08q² and a marginal cost MC 0.5 + 0.16q. a) If the going rate for developing a roll of film is €8.50, is the industry in long-run equilibrium? If not, find the price associated with long-run equilibrium. b) Suppose now that a new technology is developed which will reduce the cost of film developing by 25 percent. Assuming that the industry is in long-run equilibrium, how much would any one store be willing to pay to purchase this new technology?

Exercise 2.7 (P&R, chap. 8, p. 326: Exercise12) A number of stores offer film developing as a service to their customers. Suppose that each store offering this service has a cost function C(q) = 50+ 0.5q + 0.08q² and a marginal cost MC 0.5 + 0.16q. a) If the going rate for developing a roll of film is €8.50, is the industry in long-run equilibrium? If not, find the price associated with long-run equilibrium. b) Suppose now that a new technology is developed which will reduce the cost of film developing by 25 percent. Assuming that the industry is in long-run equilibrium, how much would any one store be willing to pay to purchase this new technology?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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