Suppose there are initially two identical firms that serve a market with constant marginal and average costs,
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Suppose there are initially two identical firms that serve a market with constant marginal and average costs, \(M C=A C=6\), per unit of output. Firm 1 gains a first-mover advantage from an opportunity to purchase an input at a lower cost than is available to Firm 2. This reduces Firm 1's constant marginal and average costs to
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To determine Firm 1s new constant marginal and average costs after gaining the advantage lets denote ...View the full answer
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