Evaluating Government Interventions in a Heterogeneous Market
A government wants to increase the total short-run output of a specific good. The competitive market for this good has two types of producers: 20 'Type L' firms, each with a marginal cost of $10 per unit and a capacity of 100 units, and 15 'Type H' firms, each with a marginal cost of $18 per unit and a capacity of 80 units. The current market price is stable at $15. The government is considering two different policies. Based on an analysis of their likely short-run effects, which policy should the government choose to achieve its goal? Justify your choice.
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Evaluating Government Interventions in a Heterogeneous Market
Consider a competitive market for a specific good with two types of producers. There are 10 'Type A' firms, each capable of producing up to 20 units at a constant marginal cost of $5 per unit. There are also 5 'Type B' firms, each capable of producing up to 30 units at a constant marginal cost of $8 per unit. If the prevailing market price for the good is $7, what is the total quantity supplied by all firms in the market?