A perfectly competitive industry has 10 firms,each with an MC curve that can be expressed as MC = 5q,where q is the level of output for each firm.Which equation would describe the industry supply curve,where Q is the market quantity and P is the market price?

Question

Quizplus · Accepted Answer

The industry supply curve is derived by horizontally summing the individual firm's supply curves. Given MC = 5q for each firm, and there are 10 firms, the total market quantity (Q) supplied is 10 times the quantity supplied by each firm (q), so Q = 10q. Since MC = P for perfect competition, we have P = 5q. Substituting Q/10 for q (since Q = 10q), we get P = 5(Q/10) = 0.5Q, which matches option B.

A Perfectly Competitive Industry Has 10 Firms,each with an MC