If Tiger Toys faces a demand curve of P = 85 − 0.25Q and a MC = ATC = 20,then the market price would be
A)$85.00.
B)$52.50.
C)$130.00.
D)$32.50.

Question

Quizplus · Accepted Answer

To find the market price, we need to set the demand equal to the supply.

Demand: P = 85 - 0.25Q
Supply: P = MC = ATC = 20

Setting the demand equal to the supply:
85 - 0.25Q = 20
0.25Q = 65
Q = 260

So, the market quantity is 260. Plugging back into either the demand or supply function, we can find the market price:
P = 85 - 0.25(260)
P = 22.50

Therefore, the best choice is B, as it is closest to $22.50.

If Tiger Toys Faces a Demand Curve of P =