Short Run Market Supply (8 Points – 4 points each). Carolina Textiles, Inc. is a small manufacturer of cotton linen bed products for the hospital industry 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
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.
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Derive the firm’s supply curve, expressing quantity as a function of price (remember that P = MR in a perfectly competitive market). Develop the firm’s total variable cost (TVC) and average variable cost (AVC) equations? |
Carolina Textiles, Inc. is a small manufacturer of cotton linen bed products for the hospital industry that it sells in a perfectly competitive market. Given $100,000 in fixed costs per day, the daily