Question

1. (60 points) Company X is in a perfectly competitive industry and is in long run. That is, X has not picked its scale and fixed equipment yet. X has two scale options: Option I: TFC $7,500,000, TVC(a) 100+ 10,000 Q2, in $. Option Il: TFC $6,000,000, TVC(Q) 120+ 25,000 Q2, in $. a) (10 points) Plot ATC and MC for both options on the same graph with x-axis representing the quantity and y-axis representing MC and ATC. (You can use any software) b) (10 points) Denote the quantity at which ATC, and ATCi are equal to each other, Qx. Solve Q c) (15 points) What is the minimum price, denoted by Py, at which you would prefer scale I rather than scale lII? d) (15 points) ls P, equal to ATG (ОЈ ? Why or why not? Note that atd., ATO, (Ox) ATCI Ox

Answer 1

Answer 1)