Suppose the following information is known about a market: 1. ...

[anshika]

Suppose the following information is known about a market: 1. Sellers will not sell at all below a price of 2. 2. At a price of 10, any given seller will sell 10 units. 3. There are 100 identical sellers in the market. Assuming a linear supply curve, use this information to derive the market supply curve.
 
  What will be an ideal response?

Question 2

The Law of Supply ensures that supply curves slope upward.
 
  Indicate whether the statement is true or false

[xoxo123]

Answer to Question 1

First, Q = 100q since all firms are identical. This gives two points: (p = 2, Q = 0 ) and (p = 10, Q = 1000 ). From the first point, it is known that p = 2 + bQ. When Q = 1000, 10 = 2 + b(1000). Solving for b yields b = .008. Rearranging to solve for Q yields: Q = -250 + 125p or P = 2 + .008Q.

Answer to Question 2

False. There is no Law of Supply that requires the market supply curve to have a particular slope.