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Microeconomics

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Supply and Demand: You Have to Pay the Sugarman

MICRO-GVQXRK

In a competitive market for candy, firms face the following costs:

\$1,000,000 to open a factory

To make a ton of candy, each firm must pay:

\$100 to workers
\$500 to buy sugar
\$100 in machine maintenance

Due to crowding in the factory, adding each ton of candy costs \$200 more in labor costs than the unit before. So, for example, making the first unit costs \$900 not counting the cost to open the factory, and making the second unit costs \$1100.

Assuming that the firms do not all shut down, how many tons of candy does each firm make in the long run?

A

It depends on the demand curve

B

100

C

700

D

1000000