Suppose that fixed costs for a firm in the automobile industry are $5 billion and that marginal costs are $17,000 per automobile. Because more firms increase competition in the market, the market price falls as more firms enter; as shown by P = 17,000 + (150/n) where n is the number of firms in a market. Assume annual sales in the U.S. market are 300 million automobiles. What is the equilibrium number of firms in the U.S. automobile market?

Suppose that fixed costs for a firm in the automobile industry are $5 billion and that marginal costs are $17,000 per automobile. Because more firms increase competition in the market, the market price falls as more firms enter; as shown by P = 17,000 + (150/n) where n is the number of firms in a market. Assume annual sales in the U.S. market are 300 million automobiles. What is the equilibrium number of firms in the U.S. automobile market?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.3P

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