Compute how many firms can efficiently serve the market

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Reference no: EM13192241

The firms's cost function is C(Q) = 100 + 10Q + Q2.
a) Determine the efficient scale of production. (Hint: Compute the average cost AC(Q) and determine the level of production, which minimizes average cost.)
b) Assuming that the demand is D(P) = 100 - 2P. The regulator chooses average cost pricing. Compute how
many firms can efficiently serve the market and the total amount Q produced. (Hint: It suffices to compute the price at the efficient production level computed in a) to determine whether the inverse demand crosses the average cost function at the left or right of its minimum. At the price equal to the minimum average cost, the
corresponding demand determines the number of firms.)
c) Assuming that the demand is D(P) = 15-0.25P. The regulator chooses average cost pricing. Compute how many firms can efficiently serve the market and the total amount Q produced. The same hint as in b) applies to c).

Reference no: EM13192241

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