Question 2

Consider a competitive market in which themarket demandfor the product is expressed as

P = 75 - 1.5Q,

and themarket supplyof the product is expressed as

P = 25 + 0.50Q.

Price, P, is in dollars per unit sold, and Q represents rate of production and sales in hundreds of units per day. Thefirm Ain this market has a marginal cost of

MC = 2.5 + 10q.

a. Determine the equilibrium market price and rate of sales (quantity).

b. Determine thefirm A's total sales (supply quantities), given your answer to part (a) above.

c. If themarket demandwere to increase towhat would the new price and rate of sales in the market be? What would the new total sales of thefirm A(firm A's supply) would be?

Question 3

In an unregulated competitive market, supply and demand have been estimated as follows:

Demand P = 25 - 0.10Q Supply P = 4 + 0.116Q,

where P represents unit price in dollars, and Q represents number of units sold per year.

a. Calculate annual aggregate consumer surplus.

b. Calculate annual aggregate producer surplus.