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17 May, 15:29

A number of stores offer film developing as a service to their customers. Suppose that each store offering this service has a cost function (C) C (q) equals50plus0.20qplus0.0800q squared and a marginal cost (MC) of MC (q) equals0.20plus0.160q. If the going rate for developing a roll of film is $8.00 , is the industry in long-run equilibrium? No. Find the price associated with long-run equilibrium. The market will be in long-run equilibrium when the price is $ 25. (Enter your response rounded to two decimal places. )

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  1. 17 May, 15:51
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    Check the following calculations.

    Explanation:

    C (q) = 50+0.20q+0.0800q2

    MC (q) = 0.20+0.160q

    In the long run market will be in equilibrium when P=MC=ATC=LRAC=LRMC

    where LRAC=long run average cost curve

    LRMC=long run marginal cost curve

    ATC=average total cost

    noe total cost C (q) = 50+0.20q+0.0800q2

    therefore ATC=C (q) / q

    = 50/q + 0.20 + 0.0800q

    therefore in long run MC=ATC

    0.20+0.160q=50/q + 0.20 + 0.0800q

    on solving q=25

    therefore P=ATC=MC=0.20+0.160q

    =0.20+0.16*25

    P = 4.20
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Home » Business » A number of stores offer film developing as a service to their customers. Suppose that each store offering this service has a cost function (C) C (q) equals50plus0.20qplus0.0800q squared and a marginal cost (MC) of MC (q) equals0.20plus0.160q.
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