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Deriving short run supply curve

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Carolina Textiles, Inc., is a small manufacturer of cotton linen that it sells in a perfectly competitive market. Given $100,000 in fixed costs per day, the daily total cost function for this product is described by:

TC = $100,000 + $2Q + $0.0625Q2

MC = dTC/dQ = $2 + $0.125Q

where Q is units of cotton linen produced per day. Assume that MC > AVC at every point along the firm's marginal cost curve, and that total costs include a normal profit.

A. Derive the firm's supply curve, expressing quantity as a function of price.
B. Derive the market supply curve if North Carolina Textiles is one of 1,000 competitors.
C. Calculate market supply per day at a market price of $47 per unit.

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Solution describes the steps to find short run supply curve of a firm and market in the perfectly competitive market.

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A. Derive the firm's supply curve, expressing quantity as a function of price.

A perfectly competitive firm sets its output level such that Marginal ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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