Statistics Solutions

(All Steps) A number of stores offer film developing as a service to their customers. Suppose that each store offering this service has a cost function C(q)=50

Question: A number of stores offer film developing as a service to their customers. Suppose that each store offering this service has a cost function C(q)=50 + .5q + .08q 2 and a marginal cost MC= .5 +.16q

  1. If the going rate for developing a roll of film is $8.5, is the industry in the long run equilibrium? If not, find the price associated with the long run equilibrium.
  2. Suppose now that a new technology is developed which will reduce the cost of film developing by 25 % assuming that the industry is in the long run equilibrium, how much would any one store be willing to pay to purchase this new technology.

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