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Question A2 In the short run the market supply is a) the horizontal sum of each firms average cost curve. b) the horizontal

Question A7 A bahn mi store is a price taker and faces the following in the short-run: • Average total costs $6, marginal cos

Question AS Consider perfectly competitive constant cost industry. If the government imposes a tax on consumers of $t per uni

Need full explanation pls

Thank you

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Answer #1

(A2) (d)

Single firm's supply function is its MC curve lying above AVC. So market supply is horizontal summation of individual supply curves which are MC curves as long as price is higher than AVC.

(A7) (c)

Since P = MC = $5, firm is producing optimal quantity, and since Price > AVC, firm will continue producing in short run.

(A8) (c)

In constant cost industry, supply curve is horizontal, so supply is perfectly elastic. When supply is perfectly elastic, entire tax burden falls on consumers.

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