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The Inverse Demand for a Product Is Given by P

question 19

Essay

The inverse demand for a product is given by P = 400 - 5Q, where Q measures the number of units and P is the price per unit. Suppose that total cost is TC = 100Q + 2.5Q2 with marginal cost per unit of MC = $100 + 5Q. Technological innovation reduces total cost to TC = 25Q + 2.5Q2 and marginal cost per unit to MC = $25 + 5Q. Identify equilibrium price and quantity before and after the cost reduction. How does profit change?


Definitions:

Statistical Discrimination

A theory explaining how prejudice can arise in hiring or decision-making based on stereotypes associated with aggregate statistics rather than on individual attributes.

Productive

Describes a state or quality of being able to produce a significant amount of output within a given period of time.

Statistical Discrimination

A form of discrimination that occurs when decisions are made based on statistical averages or generalizations about groups, rather than on individual merits.

Individual Members

Refers to single persons or entities that are part of a larger group or organization.

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