Stanford Plastics, Inc. and Cal-Tech Associates, Inc. supply a generic phone jack that connects telephone cords to phone outlets. Proprietary cost and output information for
Stanford Plastics, Inc. and Cal-Tech Associates, Inc. supply a generic phone jack that connects telephone cords to phone outlets. Proprietary cost and output information for each company reveal the following relations between marginal cost and output:
MCS=TCS/Q = $1 + $0.00002QS(Stanford) MCC=TCC/Q = $1.50 + $0.000005QC(Cal-Tech)
The wholesale market for modular phone jacks is vigorously price-competitive, and neither firm is able to charge a premium for its products. Thus, P = MR in this market.
- Determine the supply curve for each firm. Express price as afunction of quantityandquantity as a function of price. (4 marks)
- Calculate the quantity supplied by each firm at prices of $1, $1.50, and $2. What is the minimum price necessary for each individual firm to supply output? (6 marks)
C. Determine the industry supply curve when P < $1.50 (2 marks)
D. Determine the industry supply curve when P > $1.50. To check your answer, calculate quantity at an industry price of $2 and compare your answer with part B. (4 marks)
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