Question

President Dwight Eisenhower is credited with the establishment of a national network of controlledaccess roadways–now simply called “Interstates”–authorized under the Federal Aid Highway Act of 1956. The road construction and growing popularity of highway travel presented an opportunity for PQMaps, which created and sold maps for highway drivers. The paper maps were printed in color and folded for drivers’ convenience. In 1960, the PQMap’s total cost curve was given by 15 + 0.6Q + 0.01Q 2 where Q was measured in standard bulk units of printed material. PQMap’s marginal cost was 0.6 + 0.02Q.

12. What was the firm-level supply curve for PQMap?

13. Suppose there were 5 map printing companies operating in the U.S. in 1960. All of the firms are price-takers. What was the market-level supply curve for highway maps?

14. Suppose that the market demand for printed maps in 1960 is given by 9300 − 722P. What was the equilibrium price and quantity of highways maps in America in 1960?

15. Suppose that you are an analyst who is interested in the map production industry. You already have the equilibrium price and quantity data for 1960. As you do more research, you find recent a statistic for the market. You learned that, in 2015, roughly 1,200 bulk units of paper highway maps were sold at a price of $6. What must have happened in the map printing market between 1960 and 2015? You can speculate, but you must justify your argument. (Hint: Start with a graph.)

Answer 1

Part 12)

firm's supply curve is nothing rising portion of marginal cost curve

Part 13) Since there are 5 firms in the market

Part 14)

in 1960 , 2280 maps were old at price of $ 9.7

Part 15)

In 2015, 1200 maps are sold at price of $6.

Therefore, in 45 years quantity of maps sold has fallen by 47.3% whereas price also has decreased by 38.27%

There are 2 explanations

first explanation

If we assume that market demand and market supply function for the market remain the same, then in 2015 the market is not in equilibrium there is excess demand for maps.

second explanation

comparing 1960 and 2015 data, one can say that maps are a griffen good given rapid technologcial development that has taken place in 45 years. People are now less interested in buying maps. It has now turned to be antique object