Question

There are four consumers willing to pay the following amounts for an electric​ car: Consumer​ 1: Consumer​ 2: Consumer​ 3: Consumer​ 4: ​$6060​,000 ​$3030​,000 ​$8080​,000 ​$5050​,000 There are four firms that can produce electric cars. Each can produce one car at the following​ costs: Firm​ A: Firm​ B: Firm​ C: Firm​ D: ​$2020​,000 ​$8080​,000 ​$3030​,000 ​$5050​,000 Each firm can produce at most one car. Suppose the market for electric cars is competitive. Why is the equilibrium price in this market ​$5050​,000?

Answer 1

Answer:Equilibrium price = $5050 000. Firm's profit will be maximized when the Cost of Producing an additional car cost $5050 000 (Price = Marginal cost)

Step-by-step explanation:

Firms competing in a Competitive Marker are price takers, They Maximize their profits by controlling Quantity Produced and Supplied in Market, meaning Firms adjust quantity produced and supplied in the market to find the quantity level that will maximize profits.

Firm's Profits are Maximized when the firm produces at a quantity level where Price equals Marginal cost, Marginal cost being the cost of producing one additional unit . When the price of a good or service equals Marginal cost there is no economic profits that can be derived by producing more thus the profits are maximized at that level of quantity.

When The costs of producing one eletric car are below the price firms earn economic profits and have an opportunity to earn more profits by producing more

The Price consumer 4 is willing to pay is $5050 000, This price is the only price that equals the firms cost of producing 1 eletric car for which is the cost incurred by Firm D ($5050 000.

Firm's profit will be maximized when the Cost of Producing an additional car cost $5050 000 (Price = Marginal cost)

The Equilibrium Market price = $5050 000.