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2. Banana Computer Company sells Banana computers in both the domestic and foreign markets. Because of differences in the power supplies, a Banana purchased in one market cannot be used in the other market. The demand and marginal revenue curves associated with the two markets are as follows: Pa = 20, 000 - 20Q P₁ = 25,000 - 50Q MR = 20, 000 - 40Q MR = 25, 000-100Q. Banana's production process exhibits constant returns to scale and it takes $1,000,000 to produce 100 computers. a. Write down Banana's long-run average cost function and long-run marginal cost function. Draw the average and marginal cost curves. (Hint: If there are constant returns to scale, does long-run average cost change as output changes?) b. Draw the demand curve for the domestic market in black ink and the marginal revenue curve for the domestic market in pencil. Draw the demand curve for the foreign market in red ink and the marginal revenue curve for the foreign market in blue ink.

2. Banana Computer Company sells Banana computers in both the domestic and foreign markets. Because of differences in the power supplies, a Banana purchased in one market cannot be used in the other market. The demand and marginal revenue curves associated with the two markets are as follows: Pa = 20, 000 - 20Q P₁ = 25,000 - 50Q MR = 20, 000 - 40Q MR = 25, 000-100Q. Banana's production process exhibits constant returns to scale and it takes $1,000,000 to produce 100 computers. a. Write down Banana's long-run average cost function and long-run marginal cost function. Draw the average and marginal cost curves. (Hint: If there are constant returns to scale, does long-run average cost change as output changes?) b. Draw the demand curve for the domestic market in black ink and the marginal revenue curve for the domestic market in pencil. Draw the demand curve for the foreign market in red ink and the marginal revenue curve for the foreign market in blue ink.

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter11: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 14CQ
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2. Banana Computer Company sells Banana computers in both the domestic and foreign markets. Because of differences in the power supplies, a Banana purchased in one market cannot be used in the other market. The demand and marginal revenue curves associated with the two markets are as follows: Pa = 20, 000 - 20Q P+= 25,000 - 50Q MR = 20, 000 - 40Q MR₁ = 25,000 - 100Q. Banana's production process exhibits constant returns to scale and it takes $1,000,000 to produce 100 computers. a. Write down Banana's long-run average cost function and long-run marginal cost function. Draw the average and marginal cost curves. (Hint: If there are constant returns to scale, does long-run average cost change as output changes?) b. Draw the demand curve for the domestic market in black ink and the marginal revenue curve for the domestic market in pencil. Draw the demand curve for the foreign market in red ink and the marginal revenue curve for the foreign market in blue ink.
Transcribed Image Text:2. Banana Computer Company sells Banana computers in both the domestic and foreign markets. Because of differences in the power supplies, a Banana purchased in one market cannot be used in the other market. The demand and marginal revenue curves associated with the two markets are as follows: Pa = 20, 000 - 20Q P+= 25,000 - 50Q MR = 20, 000 - 40Q MR₁ = 25,000 - 100Q. Banana's production process exhibits constant returns to scale and it takes $1,000,000 to produce 100 computers. a. Write down Banana's long-run average cost function and long-run marginal cost function. Draw the average and marginal cost curves. (Hint: If there are constant returns to scale, does long-run average cost change as output changes?) b. Draw the demand curve for the domestic market in black ink and the marginal revenue curve for the domestic market in pencil. Draw the demand curve for the foreign market in red ink and the marginal revenue curve for the foreign market in blue ink.
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