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In the city of Gelato the market for ice cream is perfectly competitive. Aggregate demand for ice cream is:
where p is the price for one cone of ice cream. All ice cream producers in the city have the similar total cost function:
where Qi represents the number of ice cream cones firm i makes. Suppose that the market is in equilibrium.
a) Derive the firms' marginal and average cost.
b) Compute price and quantity in equilibrium.
Q. Relation between average cost and marginal cost? Relationship between MC and AC are the following: If MC is below AC then AC should be falling. This is because, if MC
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