In the reclining chair industry (which is perfectly competitive) , two different technologies of production exist. These technologies exhibit the following total cost functions: C1(Q) = 1,000 + 600Q - 40Q2 + Q3
C2(Q) = 200 + 145Q - 10Q2 + Q3
Due to foreign competition, the market price of reclining chairs has fallen to $190. In the short run, firms using technology 1
A) and firms using technology 2 will remain in business.
B) will remain in business and firms using technology 2 will shut down.
C) will shut down and firms using technology 2 will remain in business.
D) and firms using technology 2 will shut down.
E) More information is needed to make a judgment.
Correct Answer:
Verified
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