An industry has 100 firms. These firms have identical production functions. In t
ID: 1097911 • Letter: A
Question
An industry has 100 firms. These firms have identical production functions. In the short run, each firm has fixed costs of $400. There are two variable factors in the short run and output is given by y=(min(x1,4x2))1/2. The cost of factor 1 is $4 per unit and the cost of factor 2 is $2 per unit. In the short run, the industry supply curve is given by:
(a) Q = 100p/9
(b) Q = 100p/8
(c) Q = 600 p1/2
(d) the part of the line Q= 50(min(4,8)) for which pQ >400/Q.
(e) None of the above.
The answer is (a). Please explain the solution
Explanation / Answer
the part of the line Q= 50(min(4,8)) for which pQ >400/Q.