Question

In a competitive market, a leather good company has the following total cost function of making leather bags: C(q) = 75+q2. What is function of the firm’s supply curve? Group of answer choices S(p)=2p S(p)=5p S(p)=25p S(p)=p S(p)=0.5p

Answer 1

Here, total cost function is 75 + Q^2

Now the supply curve is defined s the quantity of goods that the producers decide to sell in the market at any given prices.

Now, in perfect competitive market, supply curve equation is defined by the marginal cost of the leather good company.

Hence, from total cost function, the marginal cost function will be as :-

(0+ 2Q ) = 2Q

So, supply =2Q =P  

Hence, S(P) = 0.5P

Therefore, option E that 0.5P is correct and appropriate