The Market Demand for a Type of Carpet Known as KS-12

Essay

The market demand for a type of carpet known as KS-12 has been estimated as
P = 75 - 1.5Q,
where P is price ($/yard), and Q is output per time period (thousands of yards per month). The market supply is expressed as P = 25 + 0.50Q. A typical competitive firm that markets this type of carpet has a marginal cost of production of
MC = 2.5 + 10q.
a. Determine the market equilibrium price for this type of carpet. Also determine the production rate in the market.
b. Determine how much the typical firm will produce per week at the equilibrium price.
c. If all firms had the same cost structure, how many firms would compete at the equilibrium price computed in (a) above?
d. Determine the producer surplus the typical firm has under the conditions described above. (Hint: Note that the marginal cost function is linear.)