Lecture 6: Questions

1. There are two consumers of pizza in a market, Rick and Janet. Rick is willing to
pay $10 for the first pizza, $6 for the second, $2 for the third, and nothing for any
more pizzas. Janet is willing to pay $8 for the first, $5 for the second, $3 for the third
and nothing for any more pizzas.

Use this information to construct a demand curve for Rick, a demand curve for Janet,
and a demand for the market.

2. Consider a market where there are 5 sellers each with individual supply q = 4P,
and 5 sellers with individual supply q = 2 + p.
a) Calculate the market supply curve and draw it.
b) Suppose the market demand curve is given by Q = 130 5P.
Find the competitive equilibrium and quantity.
c) Show the individual supply curve of each seller next to the supply and demand
diagram. Include the chosen quantity for each seller at the equilibrium price.







Lecture 6: Questions

3. A representative seller has a MC curve given by MC = 2q,
and an ATC curve given by ATC = q + 100/q.
a) Compute the MC and ATC for quantities q = 1, 5, 10, 20 and 30.
Draw the MC and ATC curves.
b) At what quantity q are MC and ATC equal?
c) If the competitive equilibrium price P = 40, then what is the quantity chosen by
the representative seller.
d) Does the seller make a profit or a loss?
Calculate the profit and show it in the MC and ATC diagram.