A small nation has three gasoline suppliers with a linear monthly market demand equal to: Q = 500,000 - 5P. Each firm's marginal cost (MC)and average total cost (ATC)curves are horizontal at $10,000 per month.
-Refer to the information above. If the firms compete, what is the equilibrium quantity in the market?

Question

Quizplus · Accepted Answer

To find the equilibrium quantity, we first need to determine the equilibrium price. Since the marginal cost (MC) is given as $10,000, and in a competitive market, price equals marginal cost (P = MC), we set P = $10,000. Substituting P = 10,000 into the demand equation Q = 500,000 - 5P gives us Q = 500,000 - 5(10,000) = 500,000 - 50,000 = 450,000. Therefore, the equilibrium quantity is 450,000.

A Small Nation Has Three Gasoline Suppliers with a Linear