Question

Consider an industry in which only three sellers operate. Their inverse supply curves are given by

?=?1+10

?=?2+14 and,

?=?3+18

Part 1

The market supply presents _____________    kink(s).

Part 2

Suppose the market price equals $11 per unit. A total of _________________    unit(s) will be supplied in this market.

Answer 1

Part 1

S1= P - 10

S2 = P - 14

S3 = P - 18

Therefore,

When S1 = 0, p = 10
When S2 = 0, p = 14
When S3 = 0, p = 18
Market supply is horizontal summation of individual supply curves. Market supply curve has kink in it where the market price become low enough that some firms reduces it's market supply to zero. Therefore, market supply will have 3 kinks.

Part 2

When P = 11, only seller 1 will supply, since seller 2 and seller 3 has minimum acceptable price of 14 and 18
respectively.

For seller 1,
S1 = 11 - 10 = 1 unit

Therefore, a total of 1unit will be supplied at price equals $11.