Question
New South Wales Weavers, Inc., is a medium-sized manufacturer of fabrics that sells in a perfectly competitive market. Given $30,000 in fixed costs, the total
New South Wales Weavers, Inc., is a medium-sized manufacturer of fabrics that sells in a perfectly competitive market. Given $30,000 in fixed costs, the total cost function for this product is described by:
TC = $30,000 + $1Q + $0.00002Q2
MC = TC/Q = $1 + $0.00004Q
where Q is square metres of fabric produced per month. Assume that MC > AVC at every point along the firm's marginal cost curve, and that total costs include a normal profit.
a) Derive the firm's supply curve, expressing quantity as a function of price. (2 Marks)
b) Derive the market supply curve if New South Wales Weavers is one of 400 competitors. (2 Marks)
c) Calculate market supply per month at a market price of $1.50 per square metre. (2 Marks)
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