The Market for Sweet Potatoes Consists of 1,000 Identical Firms $q = P / 200 - .5$

question 61

Multiple Choice

The market for sweet potatoes consists of 1,000 identical firms. Each firm has a short-run total cost curve of STC = 100 + 100 q + 100q2, and a short-run marginal cost curve of SMC=100+200q where q is output. Suppose that sunk costs are 75 and nonsunk costs are 25. What is the equation of an individual firm's short-run supply curve?

• A) \(q = P / 200 - .5\) for \(P \geq 100\), and \(q = 0\) otherwise
• B) \(q = P / 100 - .5\) for \(P \geq 200\), and \(q = 0\) otherwise
• C) \(P = 100 + 200 q\)
• D) \(q = P / 200 - .5\) for \(P \geq 200\), and \(q = 0\) otherwise

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Definitions:

PE Ratio

Price-to-Earnings Ratio; a valuation measure for a company comparing its current share price to its per-share earnings.

Yield %

The income return on an investment, such as the interest or dividends received, expressed as a percentage of the investment's cost or value.

Default Risk Premium

The additional yield that investors require to invest in bonds that have a risk of default, compared to risk-free bonds.

Liquidity Risk Premium

The extra yield or return that investors demand for holding a security that may not be easily sold or converted into cash without a significant loss in value.