Question

Suppose the market demand for milk is Qd=150-5P. Additionally, suppose that a dairy's variable costs are...

Suppose the market demand for milk is Qd=150-5P. Additionally, suppose that a dairy's variable costs are VC=2Q2 (where Q is the number of gallons of milk produced each day), and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market.

How much does each firm produce?

a.

20

b.

10

c.

5

d.

50

What is the equation for the Market supply curve?

a.

Qsmarket=4P

b.

Qsmarket=2.5P

c.

Qsmarket=50P

d.

Qsmarket=10P

How many active firms are in the market?

a.

5

b.

20

c.

10

d.

50

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