Heloise and Abelard produce letters in a perfectly competitive industry. Heloise is much better at it than Abelard: On average, she produces letters for half of the cost of Abelard's. a. True or False: If Heloise and Abelard are both maximizing profit, the last letter that Heloise produces will cost half as much as the last letter written by Abelard. Explain your answer. b. Suppose Heloise and Abelard both produce until their last letter costs them $5 to produce. True or False: Because the cost of their last letter is the same, nobody will earn any economic rent.
Heloise and Abelard produce letters in a perfectly competitive industry. Heloise is much better at it than Abelard: On average, she produces letters for half of the cost of Abelard's. a. True or False: If Heloise and Abelard are both maximizing profit, the last letter that Heloise produces will cost half as much as the last letter written by Abelard. Explain your answer. b. Suppose Heloise and Abelard both produce until their last letter costs them $5 to produce. True or False: Because the cost of their last letter is the same, nobody will earn any economic rent.
Chapter12: Firms In Perfectly Competitive Markets
Section: Chapter Questions
Problem 12P
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