Question: The table below shows marginal cost and average variable cost for two firms. Plot the short-run supply function for Firm A. Is there any price
The table below shows marginal cost and average variable cost for two firms.
- Plot the short-run supply function for Firm A. Is there any price between 1 and 10 for which firm A would not produce?
- Suppose that price = 3. For Firm B, there are two different quantities for which MC(Q) = 3. Which one would determine Firm Bs choice of production when price = 3? Explain.
- If price = 1, how much would Firm B produce? Explain your reasoning.
- Plot the short-run supply function for Firm B.
- Plot the aggregate supply over Firm A and Firm B. (You can ignore plotting supply for Prices = 5, 7, and 9)
Firm A Firm A Firm B Firm B Quantity Marginal cost Average variable cost Marginal Cost Average Variable Cost 0
- - - - 1 1 1 3 3 2 2 1.5 2 2.5 3 3 2 1 2 4 4 2.5 2 2 5 5 2 3 2.2 6 6 3.5 4 2.5 7 7 4 6 3 8 8 4.5 8 3.625 9 9 5 10 4.333 10 10 5.5
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