Suppose the market has two firms, and market demand is p = 200 - 4y. The cost functions for all firms are C(y_i)= 600 + 30y_i. The limit output for this market is:

Question

Quizplus · Accepted Answer

The limit output is found by setting marginal cost equal to marginal revenue. Marginal cost is the derivative of the cost function, and marginal revenue is the derivative of the revenue function. The revenue function is equal to price times quantity, so the marginal revenue function is MR = p - 4y. Setting MC = MR, we get:60 + 30y = 200 - 4y34y = 140y = 4So the limit output is 4 units.

Suppose the Market Has Two Firms, and Market Demand Is