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5. Suppose there are only two firms In the market for a certaln good. Flrm 1s marginal cost equaton is MC aggregate supply equation for this market? 5/2 1/2QS and firm 2s marginal cost equation IS MC 4 QS. What is the as 2/3P - 133 as-3P-1In the following figure, the total willingness to pay for the 10 unit of the good Is Marginal Willingness to Pay 20 21 MWTP 10 O $200 O $12 O $20 O $160In the following figure the marginal cost of producing the 500th unit of output Is Marginal Cost of Production MC 550 -- 300 500 O $550 O $150,000 O $212.500 O S500

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Answer #1

5) Aggregate supply Qs = Qs1 + Qs2

Supply curve for a firm is same as its marginal cost curve (P = MC):

Qs1 = 2 x (P - 5/2)

Qs2 = P - 4

Qs = Qs1 + Qs2 = 3P - 9

6)

Total willingness to pay = area under the demand curve upto Q = 10

TWP = 12 x 10 + (20 - 12) x 10/2 = $ 160

7) Marginal cost = $ 550

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