Supply Curve Analysis. Credible Switches, Inc., is a distributor of generic safety switches used in the washing machines and dryers. Based on an analysis of monthly cost and output data, the company has estimated the following relation between the marginal cost (wholesale cost plus distribution cost per unit) and monthly output:

A. Calculate marginal cost at 400,000, 500,000, and 600,000 units of output.
B. Express output as a function of marginal cost. Calculate the level of output at which MC = $5, $8, and $10.
C. Calculate the profit-maximizing level of output if prices are stable in the industry at $8 per switch and, therefore, P = MR = $8.
D. Again assuming prices are stable in the industry, derive CSI's supply curve for switches. Express price as a function of quantity and quantity as a function of price.

Question

Supply Curve Analysis. Credible Switches, Inc., is a distributor of generic safety switches used in the washing machines and dryers. Based on an analysis of monthly cost and output data, the company has estimated the following relation between the marginal cost (wholesale cost plus distribution cost per unit) and monthly output:
 
  A. Calculate marginal cost at 400,000, 500,000, and 600,000 units of output.
B. Express output as a function of marginal cost. Calculate the level of output at which MC = $5, $8, and $10.
C. Calculate the profit-maximizing level of output if prices are stable in the industry at $8 per switch and, therefore, P = MR = $8.
D. Again assuming prices are stable in the industry, derive CSI's supply curve for switches. Express price as a function of quantity and quantity as a function of price.

Quizplus · Accepted Answer

The Answer of Supply Curve Analysis. Credible Switches, Inc., is a distributor of generic safety switches used in the washing machines and dryers. Based on an analysis of monthly cost and output data, the company has estimated the following relation between the marginal cost (wholesale cost plus distribution cost per unit) and monthly output:
 
  A. Calculate marginal cost at 400,000, 500,000, and 600,000 units of output.
B. Express output as a function of marginal cost. Calculate the level of output at which MC = $5, $8, and $10.
C. Calculate the profit-maximizing level of output if prices are stable in the industry at $8 per switch and, therefore, P = MR = $8.
D. Again assuming prices are stable in the industry, derive CSI's supply curve for switches. Express price as a function of quantity and quantity as a function of price.