1. The Garden Gnome industry is highly concentrated; only two firms. The supply curves for the firms are: Firm A: Q=P-40; Firm B: Q = 4P-20. a. Calculate the inverted supply curves for both firms. Plot both supply curves. b. The firms merge. Calculate and plot the combined supply curve using horizontal summation. Note 1: this can be tricky. What you want to do is figure out what the minimum price would be for each firm to produce Q>0. Then you want to add their supplies (not their prices!), but only for ranges of price where their Q>0. Think through what you are doing. How can you check that you did it the right way? Note 2: you will not need to know how to do horizontal summation for either the Midterm or Final exams. However, it is good for you to work this problem, so that you understand what is going on. For example, when we study International Trade we will use horizontal summation - graphically -to model the issues. 2. The demand curve for this industry is: Q-200-2P. a. Yep, you guessed it: invert the demand curve, then plot it. b. Now plot, and then calculate, the industry equilibrium, using the supply curve from the merged firm that you calculated in part 1b above. Note 1: you will need to decide which segment of the supply curve the demand curve intersects with. Note 2: yes, you really should get in the habit of plotting these things. It is very helpful in figuring out what is going on. Typically, you should do this first before diving into the calculations. c. Calculate the consumer surplus at this equilibrium. I don't care - do it anyway, it's good for you.