ISI me II 2008

[parul jain]

On a tropical island there are 100 boat builders, numbered 1 through 100. Each
builder can build up to 12 boats a year and each builder maximizes profit given the
market price. Let y denote the number of boats built per year by a particular builder, and
for each i , from 1 to 100, boat builder has a cost function C i (y ) = 11+iy . Assume that
in the cost function the fixed cost, 11, is a quasi-fixed cost, that is, it is only paid if the
firm produces a positive level of output. If the price of a boat is 25, how many builders
will choose to produce a positive amount of output and how many boats will be built per
year in total?

[anon_econ]

For firms 1 to 25, marginal cost is less than or equal to price. they will produce 12 units if profits cover the quasi-fixed cost, and 0 is they don't cover the quasi fixed cost. u can see that firms 1 to 24 will produce 12 units and the rest of them won't produce anything.

[s]

hi..i got answer 288 boats