Suppose Melody produces muffins in a perfectly competitive market. Her cost function is TC = (0.25)Q + (0.005)Q2 + 2 MC = 0.25 + 0.01Q?
1. Identify the minimum price at which she will produce.
2.If the industry has the same cost function as Melody’s business, what will be equilibrium price?
- OiyLv 43 weeks ago
She will produce at the price=MC. The lowest price is 0.25. Everyone is the price taker, so the equilibrium price is still at p=MC=0.25+0.01Q