Question

There are two different types of producers of a good in an industry where firms are price-takers. The marginal cost curves of the two types are shown in the figure.
Type A is more efficient than Type B: for example, as shown, at the output of 20 goods, the Type A firms have the marginal cost of £2, as opposed to the marginal cost of £3 for the Type B firms. There are 20 Type A firms and 15 Type B firms in the market. Based on this information, which of the following statements is correct?

		At price €2, the market supply is 400.
		The market will supply 1000 of the good at price €3.
		At price €2, the market marginal cost of supplying one extra unit of the good will depend on the type of the firm which produces it.
		With different types of firms, the market marginal cost curve cannot be estimated.

Answer 1

It is clearly seen that at price of 3euros,

35 units present for total of 20 firm A, and at 20units present for total 15 type B firms.

Hence total supply available at 3euro is= 35×20.+. 20×15=1000.

Hence total quantity supplied is 1000 at price 3euros.