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Suppose a market is characterized by a representative consumer with demand of the form: Q D=500-5P. In the short-run, the market has 10 competing firms with individual supply qS=5+P.
A) Determine the short-run firm supply curve.
B) What is the short-run equilibrium price and quantity?
C) Determine consumer surplus, producer surplus, and dead weight loss.
D) Suppose a price floor of P=50 is imposed. What is the equilibrium price, equilibrium quantity, consumer surplus, and producer surplus?
E) Is the imposition of a price floor a Potential Pareto Improvement? How do you know? Does any party benefit from the imposition of a price floor?
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