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Question

Consider the general supply function:

Qs = 1,000 + 20P - 9PI + 25F

where

Qs = quantity supplied, P = price of the commodity, PI = price of a key input in the production process, and F = number of firms producing the commodity.

Derive the inverse of the supply function when PI = $480 and F = 60. Then using the inverse supply function, what is the supply price for 40,000 units of the commodity?


a. $91

b. $111

c. $1,000

d. $2,091

Top Answer

Inverse supply we get by simply writing supply function... View the full answer

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Decomposing -
General Supply function
Qs = 1,000 + 20 p - 9P, +25F
Wherel , P1 = $480
F = 60
put these into the above equation , we get
Q8 = 1,000+ 20 p - 9(480) +25(60)
= 1000 + 20 P - 4320 +...

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