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Suppose That We Are in a Condition of Fully Flexible

Question 12

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Suppose that we are in a condition of fully flexible prices, but production of nails will not go above 6,000 kg/week.What price will nails sell for if market demand is characterized by: (a) P = 5 - 0.5Q, (b) P = 6 - 0.5Q, and (c) P = 4 - 0.5Q, where P is in $/kg and Q is in thousands of kg/week?

Correct Answer:

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(a) P = 5 - 0.5(6), P = 5 - 3,...

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