A Certain Type of Mushroom Used to Be Produced on 50

question 52

Multiple Choice

A certain type of mushroom used to be produced on 50 farms, each of which had a cost function c(y) = y₂ + 1, where y > 0 and c(0) = 0.The firms operated as competitors.The demand curve for this kind of mushroom is given by D(p) = 52 - p.Marauding deviant Ninja turtles invaded many of the mushroom farms leaving absolute devastation and loathsome slime in their wake.(The turtles had no effect on the cost functions of farms that were not invaded.)

• A)If all of the farms but one were invaded and that farm became a monopolist, total output of mushrooms would fall to half of the preinvasion output.
• B)If all of the farms but one were invaded and that farm became a monopolist, total output of mushrooms would fall to 1/50th of the preinvasion output.
• C)If all of the farms but two were invaded and the two undamaged farms became Cournot duopolists, total output of mushrooms would be 2/3 of the preinvasion output.
• D)If half of the farms were invaded and the industry remained competitive, industry output would fall to half of the preinvasion output.
• E)If half of the farms were invaded and the industry remained competitive, industry output would fall but would be greater than half of the preinvasion output.

---

Definitions:

Mixed Cost

Expenses that have both fixed and variable components, varying with the level of activity but not in direct proportion.

High-low Method

A technique used in cost accounting to estimate variable and fixed costs based on the highest and lowest levels of activity.

Fixed Manufacturing Cost

Costs that do not change with the level of production, such as rent, salaries, and insurance.

Fixed Manufacturing Cost

Expenses that do not change with the level of production, such as rent, salaries, and equipment depreciation in a manufacturing setting.