(a)Suppose the market demand function for orchids (in pots) is given by Q=1400-30P. Now we rank...

(a)Suppose the market demand function for orchids (in pots) is given by Q=1400-30P. Now we rank the MB of each pot of orchids from the highest to the lowest, what is the MB of the 200th pot of orchids?

(b)Suppose the market supply function for orchids (in pots) is given by Q=40P-400. Now we rank the MC of each pot of orchids from the lowest to the highest what is the MC of the 200th pot of orchids?

Solutions

Expert Solution

(a) Suppose the market demand function for orchids (in pots) is given by Q=1400-30P. Now we rank the MB of each pot of orchids from the highest to the lowest, what is the MB of the 200th pot of orchids?

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Q = 1400 - 30P

For the 200th pot, the consumer will only pay a price equal to or less than the marginal benefit.

Thus, substituting the value of Q = 200 in the demand function:

200 = 1400 - 30P

30P = 1200

P = $40

Thus, for the 200th pot, the MB is $40.

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(b) Suppose the market supply function for orchids (in pots) is given by Q=40P-400. Now we rank the MC of each pot of orchids from the lowest to the highest what is the MC of the 200th pot of orchids?

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Q = 40P - 400

For the 200th pot, the producer will expect a price equal to or greater than the marginal cost.

Thus, substituting the value of Q = 200 in the supply function:

200 = 40P - 400

600 = 40P

P = $15

Thus, for the 200th pot, the MC is $15.

Rahul Sunny answered 5 months ago

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