Assume that the most efficient production technology available for making vitamin pills has the cost structure given in the following table. Note that output is measured as the number of bottles of vitamins produced per day and that costs include a normal profit.
OUTPUT: 25,500 50,500 75,500 100,500
TC: 105,00 155,000 192,000 280,500
MC: .55 1.05 2.55 3.05
b. Is this a decreasing-cost industry?
c. Suppose that the market price for a bottle of vitamins is $2.55 and that at that price the total market quantity demanded is 113,250,000 bottles. How many firms will there be in this industry?
d. Suppose that, instead, the market quantity demanded at a price of $2.55 is only 75,500. How many firms do you expect there to be in this industry?
e. Review your answers to parts b, c, and d. Does the level of demand determine this industry’s market structure?