The Demand Curve and Long-Run Supply Curve for Carpet Cleaning

question 87

Essay

The demand curve and long-run supply curve for carpet cleaning in the local market are:
Q_D = 1,000 - 10P and Q_S = 640 + 2P.
The long-run cost function for a carpet cleaning business is:
C(q) = 3 .
The long-run marginal cost function is:
MC(q) = 6q.
If the carpet cleaning business is competitive, calculate the optimal output for each firm. How many firms are in the local market? Is the carpet cleaning industry an increasing, constant, or decreasing cost industry?

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Definitions:

Experience-curve Pricing

This pricing strategy involves reducing prices based on increased efficiency and lower costs that come with gained experience over time.

Experience-curve Pricing

A pricing strategy that utilizes the cost savings gained from learned efficiency as production volume increases over time.

Cost-plus Pricing

A strategy for setting prices that involves adding a defined markup to the cost of each unit of a product.

Experience-curve Pricing

A pricing strategy that takes into account the reductions in unit costs as cumulative volume increases, due to gained efficiency and experience.