Supply Curve Analysis

question 46

Essay

Supply Curve Analysis. Credible Switches, Inc., is a distributor of generic safety switches used in the washing machines and dryers. Based on an analysis of monthly cost and output data, the company has estimated the following relation between the marginal cost (wholesale cost plus distribution cost per unit) and monthly output:

A. Calculate marginal cost at 400,000, 500,000, and 600,000 units of output.
B. Express output as a function of marginal cost. Calculate the level of output at which MC = $5, $8, and $10.
C. Calculate the profit-maximizing level of output if prices are stable in the industry at $8 per switch and, therefore, P = MR = $8.
D. Again assuming prices are stable in the industry, derive CSI's supply curve for switches. Express price as a function of quantity and quantity as a function of price.

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Definitions:

Entrapment Defense

A legal defense claiming the defendant was induced by law enforcement to commit a crime they otherwise would not have committed.

Entrapment

A relatively common defense under which the defendant claims that he would not have committed the crime or broken the law if he had not been induced or tricked into doing so by law enforcement officials.

Insider Trading

The illegal trading of a public company's stock by someone with access to nonpublic, material information about the company.

Tipping

The practice of giving money, beyond the cost of a service, to certain service workers for a job well done.