18. (Figure: Increasing Costs) Price $40 Firm 1 30 MC AC 20 18 15 10 5...

Question

Question

18. (Figure: Increasing Costs) Price $40 Firm 1 30 MC AC 20 18 15 10 5 10 15 20 25 30 35 40 45 50 Quantity Firm 2 Price $40 3

business economics

Answer 1

Answer #1

The firms will maximize profit by equating price with MC.

When Price is $15, firm 1 produces 20 units and firm 2 produces 8 units, hence industry supply = 20 + 8 = 28.

When Price is $18, firm 1 produces 25 units and firm 2 produces 10 units, hence industry supply = 25 + 10 = 35.

Answer 2

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