- 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 level | ATC forPlant A($) | ATC forPlant B($) | ATC forPlant C($) | ATC forPlant D($) | ATC forPlant E($) |
| 10 | 9 | 13 | 16 | 17 | 20 |
| 20 | 7 | 11 | 13 | 14 | 17 |
| 30 | 6 | 8 | 11 | 12 | 15 |
| 40 | 7 | 5 | 7 | 8 | 14 |
| 50 | 8 | 6 | 4 | 6 | 12 |
| 60 | 9 | 9 | 6 | 4 | 8 |
| 70 | 10 | 13 | 12 | 8 | 6 |
| 80 | 14 | 16 | 16 | 14 | 9 |
| 90 | 17 | 18 | 19 | 17 | 14 |
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.
- marks)
- The following questions are related to collusive model of oligopoly market:
- Why oligopoly firms would want to collude? (2 marks)
- Explain the effects of the collusion on price, output and profit of the oligopolist. Graphical illustration is required. (3 marks)
