Liquid-Diet Beverages

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4.   Suppose the following data describe the demand for liquid-diet beverages:

 

$11

$10

$9

$8

$7

$6

$5

$4

$3

$2

7

10

13

16

19

22

25

28

31

34

 

 

Price Quantity

 

demanded

Five identical, perfectly competitive firms are producing these beverages. The cost of producing these beverages at each firm is the following:

Quantity

 

produced

0

1

2

3            4

5

6

7

8

9

10

Total cost

$5

$8

$10

$13        $17

$22

$28

$36

$45

$55

$67

(a)       What price will prevail in this market?

(b)       What quantity is produced?

(c)       How much profit (loss) does each firm make?                                                                                                                 

(d)       What happens to price if two more identical firms enter the market?  

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