Use the Following General Linear Supply Function $Q _ { 5 } = 40 + 6 P - 8 P _ { I } + 10 F$

question 76

Multiple Choice

Use the following general linear supply function: $Q _ { 5 } = 40 + 6 P - 8 P _ { I } + 10 F$ where $Q _ { 5 }$ is the quantity supplied of the good,P is the price of the good, $P _ { I }$ is the price of an input,and F is the number of firms producing the good.Suppose $P _ { I }$ = $40,F = 50,and the demand function is $Q _ { d } = 700 - 6 P$ ,then if government sets a price of $50 what will be the result?

• A)a shortage of 120
• B)a surplus of 120
• C)a shortage of 160
• D)a surplus of 160

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