The following figure illustrates the marginal cost (MC)curves of two firms operating in the same industry.The marginal cost of Firm B is higher than the marginal cost of Firm A.

a)What is the optimal output of each firm if the market price is $15?
b)The government decides to shut down Firm B,as it has a higher marginal cost than Firm A.If it does so and asks Firm A to produce the combined output of firms A and B,will production be efficient? Explain your answer.
c)How does the invisible hand work in such an industry?

Question

The following figure illustrates the marginal cost (MC)curves of two firms operating in the same industry.The marginal cost of Firm B is higher than the marginal cost of Firm A.
  
a)What is the optimal output of each firm if the market price is $15?
b)The government decides to shut down Firm B,as it has a higher marginal cost than Firm A.If it does so and asks Firm A to produce the combined output of firms A and B,will production be efficient? Explain your answer.
c)How does the invisible hand work in such an industry?

Quizplus · Accepted Answer

The Answer of The following figure illustrates the marginal cost (MC)curves of two firms operating in the same industry.The marginal cost of Firm B is higher than the marginal cost of Firm A.
  
a)What is the optimal output of each firm if the market price is $15?
b)The government decides to shut down Firm B,as it has a higher marginal cost than Firm A.If it does so and asks Firm A to produce the combined output of firms A and B,will production be efficient? Explain your answer.
c)How does the invisible hand work in such an industry?

The Following Figure Illustrates the Marginal Cost (MC)curves of Two