A) TC = FC + MC*Q
AC = FC/Q + MC
AC = 400,000/Q + 200
As AC is falling continuously , so economies of scale exists.
B) Q = S/n
So AC = (400,000n /S ) + 200
AC = (400,000*n/ 20,000) + 200
AC = 20*n + 200
C)
Slope of this function is positive, as number of firms increase, each firm gets less of the market share, so the Production cost increase , gains of internal Economies of scale could not realised.
7. Consider a monopolistically competitive industry where demands and costs are all mc function is the same for all fir...
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