Three hundred paper mills compete in the paper market.The total cost of production (in dollars)for each mill is given by the formula ,where Q^mill indicates the mills annual production in thousands of tons.The marginal external cost of a mill's production (in dollars)is given by the formula Finally,annual market demand (in thousands of tons)is given by the formula Find the market supply curve.

Question

Quizplus · Accepted Answer

The market supply curve is found by adding up the marginal costs of all the individual paper mills, taking into account the marginal external cost. Mathematically, this is: Market supply = Σ(marginal cost + marginal external cost) Where the summation is taken over all 300 paper mills. Substituting the given formulas, we get: Market supply = Σ(11Q^mill + 0.5Q^mill) = 11.5Σ(Q^mill) This gives us a straight line with a slope of 11.5, passing through the origin (since if all mills produce 0, the supply is 0). Therefore, the answer is C.

Three Hundred Paper Mills Compete in the Paper Market