Suppose an industry has 100 firms, each with supply curve P = 50 + 10Q. Furthermore, suppose the market demand curve is given by P = 200 - 0.9Q. What is the industry supply curve?

Question

Quizplus · Accepted Answer

The industry supply curve is found by summing the individual supply curves of all firms. Since each of the 100 firms has a supply curve of P = 50 + 10Q, the total quantity supplied by the industry at any price is 100 times the quantity supplied by a single firm at that price. Therefore, the industry supply curve is P = 50 + 10(100Q) = 50 + 1000Q. However, to express this in terms of Q on the right side (as is standard), we divide everything by 1000 to get P = 50/1000 + Q = 50 + 0.1Q, which corrects the initial explanation.

Suppose an Industry Has 100 Firms, Each with Supply Curve