Assume market demand for a homogeneous good is p=96 - Q/2, where Q is the aggregate level output and the price, P, is measured in euros

Economics Jan 24, 2023

Assume market demand for a homogeneous good is p=96 - Q/2, where Q is the aggregate level output and the price, P, is measured in euros. Adoption of a process innovation would reduce the marginal production costs, with the original marginal cost prior to innovation being MC=82; Adopting the innovation implies producing at Marginal cost MC =75.

Determine the critical cost level for the innovation to become drastic.