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Department of Economics
ECO100: Introductory Economics
Robert Gazzale, PhD
Term Test 1: Form Code: A: 20132014
Solutions: Full
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(5) [7 Marks] Assume that the technology/rm size that minimizes the LRATC curve gives
TOTAL cost as a function of quantity as TC(q
i
) = 100+15q
i
+
q
2
i
4
and marginal cost as
MC(q
i
) = 15 +
q
i
2
. Assuming a perfectly competitive market where all rms have access
to these cost functions, what is the long-run equilibrium price?
20131028A 9 Term Test 1: Solutions: Full
University of Toronto
Department of Economics
ECO100: Introductory Economics
Robert Gazzale, PhD
20131028A 10 Term Test 1: Solutions: Full