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?
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
- The current market price of bagels is $1.05/bagel.
- There are ten low-cost and ten high-cost bakeries that are producing bagels....
See full answer below.
Become a member and unlock all Study Answers
Start today. Try it nowCreate an account
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
fromChapter 2 / Lesson 2
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.