the Incom Starfighter Facility is but one of many producing Starfighters for upp

Question

the Incom Starfighter Facility is but one of many producing Starfighters for uppose that the different factions found in the Star Wars Universe (thus, making the Starfighter market perfectly competitive). The market demand and supply curves are given by: PDemand-500-Q Supply = 50 + Q If the total and marginal cost functions for the Incom facility are given by: MC = 50 + 25Q TC = 500 + 12.50° + 1012.5 This means that the Incom company will produce cach at a price of profits. Starfighters, long-run , earning

Explanation / Answer

Market:

At equilibrium: Demand = Supply

500 - Q = 50 + Q

Q = 225 and P = 275

Firm (price taker):

Supply is same as the marginal cost curve.

275 = 50 + 25q

q = 9

This means that the Incom company will produce 9 Starfighters, each at a price of 275, earning zero long run profits. (Profit = (P x q - TC))

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