Nicole wants to examine first if she wants to enter the market for Chanel bags and she assumes that the market is under perfect competition. She observed that all the firms that are producing Chanel bags have the same LR cost function and is given by C = 200 + 20q+0.5q². All firms present in the market has a fixed cost of $200 if it produces a positive output, otherwise the LR cost is zero if there is zero production. The market demand for Chanel bags is QD = 1000-2p, where p is the price of one umbrella. Currently, Nicole counted that there are 22 firms in the industry and that the market is a constant cost industry.

Nicole wants to examine first if she wants to enter the market for Chanel bags and she assumes that the market is under perfect competition. She observed that all the firms that are producing Chanel bags have the same LR cost function and is given by C = 200 + 20q+0.5q². All firms present in the market has a fixed cost of $200 if it produces a positive output, otherwise the LR cost is zero if there is zero production. The market demand for Chanel bags is QD = 1000-2p, where p is the price of one umbrella. Currently, Nicole counted that there are 22 firms in the industry and that the market is a constant cost industry.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Nicole wants to examine first if she wants to enter the market for Chanel bags and she assumes that the market is under perfect competition. She observed that all the firms that are producing Chanel bags have the same LR cost function and is given by C = 200 + 20q + 0.5q2. All firms present in the market has a fixed cost of $200 if it produces a positive output, otherwise the LR cost is zero if there is zero production. The market demand for Chanel bags is QD = 1000 - 2p, where p is the price of one umbrella. Currently, Nicole counted that there are 22 firms in the industry and that the market is a constant cost industry.(c) Suppose that the demand for the Chanel Bag shifts to QD = 1600 - 2p. Assuming that the industry is in the LR equilibrium, solve for the market clearing condition and the number of firms present.
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