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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.
Fall in Supply When the supply falls, the supply curve shifts to the left to position S 1 S 1 . At the initial equilibrium price P 1 , quantity supplied falls from q 1
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