Consider the taco stands on state street

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Consider the taco stands on State Street. Suppose that the taco market on State Street is a perfect competitive market, where all taco stands are exactly the same (i.e. producing the exact same tacos and having the exact same cost features). The market demand for tacos is given by the demand curve where P is the price per taco and Q is the market quantity of tacos: P = 100 – 2Q Each taco stand faces a marginal cost curve given by the following equation where q is the quantity of tacos produced by the firm: MC = 4q and a total cost curve given by: TC = 2q2+8 a). For each taco stand, what is the fixed cost (FC)? What is the average fixed cost (AFC) curve and the average total cost (ATC) curve? b) What is the break-even price for each taco stand? c) What is the shut-down price? (For simplicity, assume that q does not need to be an integer) d) Assume that the current price for one taco on State Street is $10. How many tacos does each taco stand produce? Suppose that there is no cost in setting up/closing down a taco stand. Will we witness entry of new taco stands into the market, or exit of existing stands from the market? e) Imagine that you are one of the taco stand owners. The current price for one taco has dropped from $10 to $7. Describe what you would do in the short run and in the long run. f). In the long run, what would the price for one taco be on State Street? How many taco stands will stay in the market?

Reference no: EM131097131

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