Answer to Question #89015 in Economics of Enterprise for Jossy

Question #89015

Problem one
Most weeks, the demand for long-stem roses can be approximated by QD = 2400 - 50p, where QD is the total quantity demanded (in dozens) at price p (per dozen). Currently, roses are supplied by 100 identical growers, each having total costs C=0.25q2+0.5q+36, where q is the number of roses (again, in dozens) supplied by the grower. The $36 cost can be avoided on a daily basis.
(a) What is the short-run supply curve for each individual grower? Describe this curve both algebraically and graphically.

Expert's answer

(a) The short-run supply curve for each individual grower is a portion of MC curve above the intersection with AVC curve.

MC = C' = 0.5q + 0.5.

So, MC = p = 0.5qs + 0.5,

qs = 2p - 1.