Question

83 Find more at www.downloadslide CHAPTER 9 PERFECTLY COMPETITIVE MARK 384 D What is Ron's short-run supply curve, assuming that all of the $40 per day fixed costs are sunk? e) What is Ron's short-run supply curve, assuming that if he produces zero output, he can rent or sell his fixed a) How large Explain. b) What wou Explain. c) Draw a gr firm. Label i and therefore avoid all his fixed costs? The bolt-making industry currently consists of 20 9,10. roducers, all of whom operate with the identical short-run d) What is currently i total cost curve STCCQ) 16+ Q, where Q is the annual output of a firm. The corresponding short-run marginal e) With d cost curve is SMC(Q) 2Q.The market demand curve for problem, equilibri bolts is D(P) = 110-P, where P is the market price. uming that all of each firm's $16 fixed cost is sunk, 9,14. a) Ass what is a firm's short-run supply curve? b) What is the short-run market supply curve? types o Each t c) Determine the short-run equilibrium price and quan-Each 10P Wha tity in this industry 9.11. Newsprint (the paper used for newspapers) is At t itive market. Each identi- and

Answer 1

a) Supply curve for a firm is given by price (P) = MC
So, P = 2Q
So, Q = P/2
This is the supply curve for a firm.

b) There are 20 producers. So, market supply is given by,
Qs = 20Q = 20(P/2) = 10P
Thus, Qs = 10P

c) Equilibrium is determined where demand = Supply. So, we get,
110 - P = 10P
So, 10P + P = 110
So, 11P = 110
So, P = 110/11
So, P = 10

Q = 10P = 10(10) = 100

The short run equilibrium price = 10 and quantity = 100.