The Squishy Industry Is Competitive and the Market Price Is

question 111

Essay

The squishy industry is competitive and the market price is $0.80. Apu's long-run cost function is: C(q, r) =


, where r is the price Apu pays to lease a squishy machine and q is squishy output. The long-run marginal cost curve is: MC(r, q) = 0.218

. What is Apu's optimal output if the price Apu pays to lease a squishy machine is $1.10? Suppose the lease price of squishy machines falls by $0.55. What happens to Apu's optimal output if the market price for a squishy remains at $0.80? Did profits increase for Apu when the lease rate of squishy machines fell?

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