Wooden tables are produced in a perfectly competitive market. Each firm has a short-run total cost curve of = 3 − 12 2 + 100 + 1000 where quantity is measured in number of tables per day. The marginal cost of production is given by = 3 2 − 24 + 100. Calculate the price below which a firm in the market will not produce any output (the shutdown price). Question 2 [7 marks] 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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