A competitive firm has a long-run total cost function c(y)= 3y2 + 675 for y 0 and c(0)= 0.Its long-run supply function is described as A)y = p/6 if p 90, y = 0 if p 88, y = 0 if p 93, y = 0 if p 93, y = 0 if p 95, y = 0 if p

Question

A competitive firm has a long-run total cost function c(y)= 3y2 + 675 for y > 0 and c(0)= 0.Its long-run supply function is described as A)y = p/6 if p > 90, y = 0 if p < 90. B)y = p/3 if p > 88, y = 0 if p < 88. C)y =p/3 if p > 93, y = 0 if p < 99. D)y =p/6 if p > 93, y = 0 if p < 93. E)y =p/3 if p > 95, y = 0 if p < 85.

Quizplus · Accepted Answer

The correct supply function must relate the price to the quantity supplied based on the cost function given. The cost function provided suggests a quadratic relationship between cost and quantity, implying that marginal cost increases with quantity. The supply function in choice A correctly identifies a price threshold (90) above which the firm supplies a positive quantity to the market, which aligns with the behavior expected from the given cost function. The supply function increases with price, which is consistent with economic theory.

A Competitive Firm Has a Long-Run Total Cost Function C(y)=