Multiple Choice
If producers of garden hoses have discovered new technology to improve production, while the number of gardeners increases, what happens in the market for garden hoses?
1
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3. The Market Forces of Supply and Demand
Using the Supply and Demand Curves to Find Equilibrium
Multiple Choice
Suppose the supply and demand curves for a product intersect at a price of 10 and a quantity of 50 units. What is the profit-maximizing price and quantity to produce?
A
Price = 8, Quantity = 60
B
Price = 12, Quantity = 40
C
Price = 15, Quantity = 30
D
Price = 10, Quantity = 50
Verified step by step guidance1
Understand that the profit-maximizing price and quantity occur where marginal cost (MC) equals marginal revenue (MR), which is also the equilibrium point in a perfectly competitive market where supply equals demand.
Recognize that the given supply and demand curves intersect at Price = 10 and Quantity = 50, indicating the market equilibrium point.
Recall that at equilibrium, the quantity supplied equals the quantity demanded, and firms maximize profit by producing where price equals marginal cost.
Compare the given options to the equilibrium point; since profit maximization occurs at the equilibrium price and quantity, the correct choice is the one matching Price = 10 and Quantity = 50.
Conclude that the profit-maximizing output and price are those at the intersection of supply and demand curves, confirming Price = 10 and Quantity = 50 as the solution.
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