Suppose there are 5,200 identical firms in the market for lemons, each with total variable costs are given by TVC (e) -4- and each firm has a fond cost of 1,044 of which 1,024 is voidable. The market demand is given by Q 85,543-3-P. The question we want to answer is: What is the market equilibrium? First, we find the price below which each firm wil not produce. Let's first find the minimum of the average variable and avoidable costs for each. Remember we only use the avoidable foxed cost and the rest of the fxed costs are not important because they do not affoct decisions. The minimum of the average cost occurs at =

Suppose there are 5,200 identical firms in the market for lemons, each with total variable costs are given by TVC (e) -4- and each firm has a fond cost of 1,044 of which 1,024 is voidable. The market demand is given by Q 85,543-3-P. The question we want to answer is: What is the market equilibrium? First, we find the price below which each firm wil not produce. Let's first find the minimum of the average variable and avoidable costs for each. Remember we only use the avoidable foxed cost and the rest of the fxed costs are not important because they do not affoct decisions. The minimum of the average cost occurs at =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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