Math Solutions

[Solution] Assume that the market for tortillas is perfectly competitive. The market supply and demand curves for tortillas are given as follows: Supply

Question: Assume that the market for tortillas is perfectly competitive. The market supply and demand curves for tortillas are given as follows:

Supply Curve: P = .000002Q

Demand Curve: P = 11 - .00002Q

The short run marginal cost curve for a typical tortilla factory is:

MC = .1 + .009Q

  1. Determine the equilibrium price for tortillas. (5 points)
  2. Determine the profit maximizing short run equilibrium level of output for a tortilla factory. (5 points)
  3. At the level of output determined above, is the factory making a profit, breaking even or suffering a loss. Explain your answer. (5 points)

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