Question

Consider 100 bicycle factories in perfect competition with each other. At a price of $100/bicycle, they...

  1. Consider 100 bicycle factories in perfect competition with each other. At a price of $100/bicycle, they together supply an aggregate of 1 million bicycles. The factories have different technologies and cost curves: some supply 20,000 bicycles, while others supply 5,000 bicycles. What is the marginal cost of the factories that supply 20,000 bicycles? What about the marginal cost of factories that supply 5,000 bicycles? Graph the situation.
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Answer #1

Since it is a perfect competition situation ,firm in equilibrium equates P = MC

this means that firm supplying 20,000 cycles equates the price $100 to its MC , so MC = $100

similarly , firm supplying 5000 cycles also equates price = MC , so MC = $100

so while the firms have same MC$100 , difference technology affects the amount supplied by the firms .

in the diagram , both the firms have different MC curve but in equilibrium each equates the price to MC

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