Suppose in the Automobile Industry with Free Entry and Exit,the

question 26

Multiple Choice

Suppose in the automobile industry with free entry and exit,the marginal cost is constant at $5,000,two identical manufacturers are currently producing 1,000 cars each and earning zero economic profit.If the equilibrium price is $20,000,then what is the fixed cost for each manufacturer?

• A)$20,000,000
• B)$15,000,000
• C)$5,000,000
• D)$10,000,000

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Definitions:

Marginal Social Cost

The cumulative expense incurred by society for creating one more unit of a product or service, encompassing both direct private costs and any external effects.

Garbage Recycled

The process of collecting, processing, and reusing materials that would otherwise be thrown away as trash.

Payment Plan

An arrangement between a seller and a buyer that allows the buyer to pay off a purchase over time in instalments.

Marginal Benefit

The extra pleasure or benefit derived from acquiring or making another unit of a product or service.