Q1: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q -----------------------------(1) - Firm B TC = 10 + 2Q -------------------------(2) Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000. Question: Use the zero profit, marginal cost curve and isoprofit curves valuing $. 34,000 and $ 60,000 on both firms to assess whether the higher isoprofit curves would always get closer to the average cost curve as quantity increases. Explain why or why not?
Q1: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q -----------------------------(1) - Firm B TC = 10 + 2Q -------------------------(2) Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000. Question: Use the zero profit, marginal cost curve and isoprofit curves valuing $. 34,000 and $ 60,000 on both firms to assess whether the higher isoprofit curves would always get closer to the average cost curve as quantity increases. Explain why or why not?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Q1: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms:
- Firm A: TC = 2Q -----------------------------(1)
- Firm B TC = 10 + 2Q -------------------------(2)
Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000.
Question: Use the zero profit, marginal cost curve and isoprofit curves valuing $. 34,000 and $ 60,000 on both firms to assess whether the higher isoprofit curves would always get closer to the average cost curve as quantity increases. Explain why or why not?
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