Suppose That the Market Demand Curve Is$p = 30 - 2 x$

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The Answer is a.Setting demand equal to supply,we get x*=10; plugging this back into either the demand or supply curve equations,we get p*=10.
b.Under a price floor,the new equilibrium quantity is determined by the demand curve.Solving the equation

16 = 30 - 2 x

,we get the new equilibrium quantity of 7.
c.Consumers pay the price floor of 16.Firms pay the price that clears the market for the new equilibrium quantity of 7 -- i.e.we can calculate the firms' net-of-additional-MC price as 7 (since the supply curve is p=x.)
d.The marginal effort cost is the difference between the price floor of 16 and the net-of-effort price 7 that firms receive -- i.e.the marginal effort cost is 9.The total effort cost firms incur is then the quantity times the marginal effort cost -- i.e.7(9)=63.

Suppose That the Market Demand Curve Is $p = 30 - 2 x$

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Suppose That the Market Demand Curve Is p=30−2xp = 30 - 2 xp=30−2x

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Suppose That the Market Demand Curve Is $p = 30 - 2 x$

Correct Answer:
Verified