Suppose the following information is known about a market: 1. Sellers will not sell at all below a price of $2. 2. At a price of $10, any given seller will sell 10 units. 3. There are 100 identical sellers in the market
Assuming a linear supply curve, use this information to derive the market supply curve.
First, Q = 100q since all firms are identical. This gives two points: (p = 2, Q = 0 ) and (p = 10, Q = 1000 ). From the first point, it is known that p = 2 + bQ. When Q = 1000, 10 = 2 + b(1000 ). Solving for b yields b = .008. Rearranging to solve for Q yields: Q = -250 + 125p or P = 2 + .008Q.
You might also like to view...
A general mismatch between the skills of unemployed workers and the skills needed by employers with job openings results in:
a. frictional unemployment. b. structural unemployment. c. cyclical unemployment. d. a higher labor force participation rate.
Property rights to resource uses are assigned to owners of the firm to avoid
A) hold-up problems. B) externalities. C) value creation. D) normal profits to the company as a whole.
The rationing function of prices refers to the:
A. fact that ration coupons are needed to alleviate wartime shortages of goods. B. tendency of supply and demand to shift in opposite directions. C. ability of the market system to generate an equitable distribution of income. D. capacity of a competitive market to equate the quantity demanded and the quantity supplied.
Output for a simple production process is given by Q = 2KL, where K denotes capital, and L denotes labor. The price of capital is $25 per unit and capital is fixed at 8 units in the short run. The price of labor is $5 per unit. What is the total cost of producing 80 units of output?
A. $233 B. $525 C. $200 D. $225