Author Question: A group of friends recently started manufacturing specialty T-shirts. The business has grown ... (Read 59 times)

dakota nelson · **on:** Jul 1, 2018

A group of friends recently started manufacturing specialty T-shirts. The business has grown rapidly, with monthly production up from 50 to 250 in the first 6 months. During this same period, average production cost has been cut in half.

The firm's long-run average cost curve over this range of output A) is downward sloping.
B) is upward sloping.
C) is horizontal.
D) may be any of the above.

Question 2

Suppose two firms with differentiated products are competing on price. The reaction curve for Firm 1 is P1 = 4 + 0.5 P2, and the reaction curve for Firm 2 is P2 = 4 + 0.5P1. What is the equilibrium price outcome in this market?

A) P1 = P2 = 4
B) P1 = P2 = 6
C) P1 = P2 = 8
D) P1 = 6 and P2 = 8