Suppose there are 20 competitive firms in a market. The supply curve of each firm is q = 2p. The market demand is Q = 200 - 2p. What is the residual demand curve facing a typical firm?
What will be an ideal response?
The residual demand curve is equal to the market demand curve minus the supply of all the other firms. The supply of the other 19 firms is 38p. The residual demand is 200 - 40p.
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Refer to Figure 2-4. A movement from Y to Z
A) represents an increase in the demand for plastic products. B) is the result of a decrease in preference for food products. C) is the result of advancements in plastic production technology. D) is the result of advancements in food production technology.
Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal, then
A) some firms will enjoy long-run profits because they operate at minimum average cost. B) the long-run price will be $0.20 per pound. C) each consumer will purchase $100 worth of potatoes. D) the long-run price will be set just above $0.20 per pound.