MC1 25 MCo 15 10 MR 0 10 20 30 40 50 60 Quandity (units per day) The kinked dema
ID: 1153725 • Letter: M
Question
MC1 25 MCo 15 10 MR 0 10 20 30 40 50 60 Quandity (units per day) The kinked demand curve and cost curves above show what Company A is facing in the market. a. b. c. How many units will the firm produce fthe firm's marginal cost is MCo? What price will the firm charge, if the firm's marginal cost curve is MCo? What will happen to the firm's profit maximizing output level if the firm's marginal cost curve shifts from MCo to MCI? d. What price will the firm charge, if the firm's marginal cost curve is MCi?Explanation / Answer
a)
Equilibrium is established where MR = MC.
Hence, equilibrium quantity is 40 units.
b)
Firm will charge price $ 20.
c)
There would not be change in profit maximizing quantity even if MC0 shifts to MC1.
d)
Price will remain same at $ 20 even if MC cost curve shifts to MC1.
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