If the typical firm’s minimum average variable cost is $10 at an output of 50 units, if marginal cost is $20 at 70 units, and there are 1,000 firms in the industry, sketch supply curves for the typical firm and for the industry as a whole.

What will be an ideal response?


For the firm, plot two supply points corresponding to P = $10 and Q = 50, P = $20 and Q = 70 (Figure 10-13). For the industry, multiply the Q’s by 1,000, so that industry Q = 50,000 at P = $10 and industry Q = 70,000 at P = $20.

Figure 10-13

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Economics

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