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Return to Figure 9.2. Suppose P0 is $10 and P1 is $11. Suppose a new firm with the same LRAC curve as the incumbent tries to break into the market by selling 4,000 units of output. Estimate from the graph what the new firm’s average cost of producing output would be. If the incumbent continues to produce 6,000 units, how much output would the two firms supply to the market? Estimate what would happen to the market price as a result of the supply of both the incumbent firm and the new entrant. Approximately how much profit would each firm earn?

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So for this question, we're giving Ah Figel. And the question says that's supposed people is equal to $10 on P. One is equal to $11. Um, supposing new film with the same r A C cough. So I give me the L. A s C call as Thean Cuban tries to break into the market by selling so a new firm wants to sell 4000, um, units of outputs on the questions estimate from the graph. What are we joined the graphs in? It's made from the graph What the new firms average costs off. So we're looking for the average cost off. Producing out bits would be on if the incubates continues to produce. So the one of continues to produce 6000 units. How much outputs with the two frames supplied to the markets and estimates, what would happen to the market price as a result, off the supply off both increments firm and the new entrance on approximate how much profits with the fame earned? So first of all, let me draw the graph so you can kind of understand what's going on so should look like this. Yeah, and, um, we have p one, no p zero. And we have p one. So this is the cost, the price. So this side is the price, and this side is output. So, um, basically, we're gonna have 4000 over here. 4000, 6000. I'm gonna have $6 on the air. We're gonna have 8000. 1000, 12,000, Mother. 16,000 on 20,000. So be one choices too. No p zero traces to 8000. So basically, I'm going to be tracing this to 8000, so this one should look like and then that over there on people traces to 5000. So this is what you look like. Andi, you should have this and then leave a trace. This over here, it should look like this. And this goes to 20,000 of our A C. And, um, this has a drawing over here. The comes over here on This is the demand, and this is the output. So this is what the graph is looking like. So the figure, as we consider figure from the above figure, if the increments firm produces 6000 units, it's a face an average cost off on $12 approximately so we can say Ah either firm producers $6000 which they intend to produce. It will face and a rich cost off $12. So if the activity firms it is, 16 firms continue to produce 6000 because the ones who produced 6000 the total out Pildes produced in the markets will increase. So Doctor Al Foods never just say if they continue to produce, 6000 units will increase. So the total supplying the markets could beauty so tell So play equals 2 12,000, which is equals to or 600 per stained for 4000. Rather, I'm sorry because we had 4000 outputs before, So that's $10,000.10,000 minutes. So on the continent supplied for 10,000 units is going to be be $10. So the profits off the firm, which the question was is to find the profits. The firm makes these 10 minus 12 once supplied by 4000. So Sudan's $12,000 and basically it's a loss because 10 minus 12 is minus two. So los off $8000 approximately So they're from the firm will have a profits off 10.5, minus 10. What's by by 6000 for the new firm. So it's good to be 10.5. I understand. Is there a point? Five times 9000 is $3000 Where fits. So this is basically how much per feeds would different and

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