Problem: "Short-Run Market Supply"
New England Textiles, Inc., is a medium-sized manufacturer of blue denim that sells in a perfectly competitive market. Given $25,000 in fixed costs, the total cost function for this product is described by:
TC = $25,000 + $1Q + $0.000008Q2
MC = ΔTC/ΔQ = $1 + $0.000016Q
where Q is square yards of blue denim 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.
b). Graph the firm's supply curve, expressing price as a function of quantity.
c). Derive the market supply curve if New England Textiles is one of 200 competitors.
d). Calculate market supply per month at a market price of $4 per square yard.