Suppose the price of bagels in Allentown is currently $1.05 per bagel. There are 10 low-cost...

Question:

Suppose the price of bagels in Allentown is currently $1.05 per bagel. There are 10 low-cost bakeries and 10 high-cost bakeries that can produce bagels, each of which has the supply function

low-cost bakery: Qs(low-cost) = 200P - 125

high-cost bakery: Qs(high-cost) = 200P - 225

(These individual supply functions apply in the short run and the long run.)

a. Which bakeries will be active when the price is $1.05?

b. If the price rises to $1.55, what will be the market supply in the short run? What will be the market supply in the long run?

Supply Function:

A supply function is a mathematical relationship between the price and quantity supplied. It measures the units of goods supplied at a particular price level. As the price of goods changes, so does the quantity of goods supplied; there is a direct or positive relationship between price and quantity supplied.

Answer and Explanation: 1

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Given information:

  • The current market price of bagels is $1.05/bagel.
  • There are ten low-cost and ten high-cost bakeries that are producing bagels....

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The Supply Curve in Microeconomics

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Chapter 2 / Lesson 2
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Discover the supply curve definition in microeconomics and the examples. Also, learn about shifts in the supply curve and examples of factors causing the shifts.


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