Does the firm compensate for the increased yield

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Question: A competitive firm produces output y. Some of its output is defective and cannot be sold. That is, only a fraction 0 E (0, 1) can be sold in the market at unit price p. Let the cost function be c (y) , with c' (y) > 0 and c"(y) > 0. Suppose that with experience, the share of good output 0 increases. Does the firm compensate for the increased yield by reducing production, or will it instead increase production?

Reference no: EM132206575

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