00:01
So here we've got two questions, and i've labeled this externalities because the big question is all about externalities.
00:06
But first we'll start with 23, where we want to think about average total cost, right? we have quantity demanded is equal to 110 minus 2p, and i'm going to set that equal to market supply, which is 3p plus 10, right? now i can find the equilibrium price.
00:27
So i get 100 is equal to 5p, p is equal to 20.
00:33
And once i have 20, i can see that quantity demanded is equal to 110 minus 2 outside of 20 is equal to 70.
00:41
And if you plug p back into quantity supplied, you get the same thing.
00:46
So now we know that the quantity demanded is 70.
00:53
Now the key thing is here, we are not given number of firms, right? we're just not given the number of firms.
01:02
So here i don't know how much the individual firm can produce.
01:06
I think it was cut off in the image.
01:09
But one way that would endogenize the number of firms is to set price equal to marginal cost, right? so we know the price is equal to 20.
01:24
The marginal cost is equal to 10q.
01:27
That means that each firm produces q equals to 2.
01:36
So now we can get the average total cost, right? so average total cost is equal to 5q is equal to 5 outside of 2 is equal to 10.
01:46
And that is option c...