Suppose Giocattolo of Italy and American Toy Company of the United States are the only two firms producing toys for sale in the U.S. market. Each firm realizes constant long-term costs so that the average total cost (ATC) equals the marginal cost (MC) at each level of output. Thus, MCo ATCo is the long-term market supply schedule for toys. Suppose Giocattolo and American Toy Company operate as competitors, and the cost schedules of each company are MCo = ATCO = $10. = On the following graph, use the grey point (star symbol) to identify the competitive market equilibrium. Then, use the green triangle (triangle symbols) to identify consumer surplus in this case. Note: Select and drag the point from the palette to the graph. Dashed drop lines will automatically extend to both axes. Then select and drag the shaded region from the palette to the graph. To resize the shaded region, select one of the points and move to the desired position. ? PRICE (Dollars per toy) 20 18 16 14 12 10 6 4 2 0 MC MR + 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 QUANTITY OF TOYS Demand H Competitive Equilibrium CS under Competition

Suppose Giocattolo of Italy and American Toy Company of the United States are the only two firms producing toys for sale in the U.S. market. Each firm realizes constant long-term costs so that the average total cost (ATC) equals the marginal cost (MC) at each level of output. Thus, MCo ATCo is the long-term market supply schedule for toys. Suppose Giocattolo and American Toy Company operate as competitors, and the cost schedules of each company are MCo = ATCO = $10. = On the following graph, use the grey point (star symbol) to identify the competitive market equilibrium. Then, use the green triangle (triangle symbols) to identify consumer surplus in this case. Note: Select and drag the point from the palette to the graph. Dashed drop lines will automatically extend to both axes. Then select and drag the shaded region from the palette to the graph. To resize the shaded region, select one of the points and move to the desired position. ? PRICE (Dollars per toy) 20 18 16 14 12 10 6 4 2 0 MC MR + 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 QUANTITY OF TOYS Demand H Competitive Equilibrium CS under Competition

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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