1. The following table shows the short-run average total costs for five successively larger plant sizes (plant size a to E) for a manufacturing company.
Output levelATC forPlant A($)ATC forPlant B($)ATC forPlant C($)ATC forPlant D($)ATC forPlant E($)
10913161720
20711131417
3068111215
40757814
50864612
6099648
7010131286
80141616149
901718191714

Based on the above five possible plant sizes and their relevant short run ATCs, construct a table showing the long run ATC of the firm for output levels 10 to 90. Then, use the information to draw the long run ATC curve.

  1. marks)
  1. The following questions are related to collusive model of oligopoly market:
    1. Why oligopoly firms would want to collude?                                                        (2 marks)
    2. Explain the effects of the collusion on price, output and profit of the oligopolist. Graphical illustration is required.     (3 marks)

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