The market for nails is perfectly competitive. There are a total of 1,000 buyers
ID: 1107091 • Letter: T
Question
The market for nails is perfectly competitive. There are a total of 1,000 buyers and each one of them has an individual demand for nails (expressed in tonnes) giver by qp 20 P. There are a total of 30,000 producers of nails facing the following costs: FC = 5, VC-5q2, MC = 10q. The average total cost for a producer is minimised atq1. D- (a) Market demand for nails is given by QD- (b) Average variable cost is given by AVC_while average total (c) In the short run, the market supply curve is given by Qs= cost is equal to ATC-Explanation / Answer
a)
Qd = 1000 x qd
Qd = 20000 - 1000P
b) AVC = VC/q = 5q
ATC = TC/q = (5 + 5q2)/q = 5/q + 5q
(TC = FC + VC)
c)
Qs = 30000 x qs
qs = P/10 (Supply curve (individual firm) is the same as the marginal cost curve)
Qs = 3000P
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