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Unformatted text preview: Q Algebra Algebra Aggregating Supply Curves We obtain industry supply by summing individual firm supply curves horizontally. Suppose there are 10 firms, each with the following MC curve: MC = 5 + 2 Q i for i = 1,2,…,10. Individual Firm MC Curves MC Q i Algebra We know that each firm will produce up to the point where MC = P. Since all firms do this, MC is equalized across firms. Substituting P = MC in the equation and inverting yields each firm’s supply curve: Algebra Total supply by the industry (Q) is the sum of individual firm supplies: Q = Q 1 + Q 2 + … + Q 10 . Substitute the individual firm supplies into this equation to get: Industry Supply Curve P Q i 5 Note: Industry inverse supply curve is much flatter than individual firm supply curves....
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This note was uploaded on 09/08/2008 for the course ECON 130 taught by Professor Staff during the Winter '08 term at UCSD.
 Winter '08
 staff

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