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Unformatted text preview: Q = (80 60) 4 = $80. 1 C. If you shut down one of your plants, the industry supply curve shifts back as follows: D S 140 P 100 60 15 19 Q Now, MC 16 = 80, MC 17 = 100, etc. The equilibrium price rises to P = $100. So shutting down one of the efficient plants will cause the equilibrium price to rise from 80 to 100. Firm 1s profits are now (100 60) 3 = $120. So he can raise his profits if he shuts down one of the plants since supply and demand are so inelastic! Firms 2, 3 and 4 have similar incentives. D. See lecture notes. 2...
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This note was uploaded on 09/08/2008 for the course ECON 130 taught by Professor Staff during the Winter '08 term at UCSD.
- Winter '08