Description
Assume that the industry for flour tortillas in Denver is perfectly competitive. There are 200 firms. 75 of the firms are “high-cost,” with short-run supply curves QHC = 5P, while the others are “low-cost,” with short-run supply curves QLC = 8P. Quantities are measured in dozens of tortillas and prices in dollars Answer the following questions:
a. Derive the short-run industry supply curve for tortillas [2 marks]
b. Assume the market demand curve for tortillas is given by QD = 10,000 – 625P. Find the market equilibrium price and quantity. [1 mark]
c. At this price, how many dozens of tortillas are produced by the high- and low-cost firms, respectively? [2 marks]
d. Determine total industry surplus at the equilibrium. [2 marks]
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Economics Questions solutions
Assume that the industry for flour tortillas in Denver is perfectly competitive. There are
200 firms. 75 of the firms are “high-cost,” with short-run supply curves QHC = 5P, while
the ...
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