(a) Industry A:
• Let a firm's total cost function in industry A be: TCA(q) = 300 + 20q + 1.5q^2.
• The minimum efficient scale (MES) of a firm with this cost function is qMES = 14.14.
(i) What is the average cost at this level of output? AC(qMES) = (Round to 2 decimal places.)
(ii) What is the average cost for a firm entering and producing q = 1? AC(q=1) = (Round to 2 decimal places.)
(b) Industry B:
• In industry B, a typical firm's total cost function is: TCB(q) = 250 + 16q + 1.5q^2.
• The minimum efficient scale of a firm with this cost function is qMES = 12.91.
(i) For a firm in Industry B, what is the average cost at this level of output? AC(qMES) = (Round to 2 decimal places.)
(ii) In Industry B, what is the average cost for a firm entering and producing q = 1? AC(q=1) = (Round to 2 decimal places.)
(c) In which industry, A or B, do economies of scale present a more serious barrier to entry? (Enter A or B.)
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