The Market Demand for Milk Is Additionally,suppose That a Dairy's

question 52

Multiple Choice

The market demand for milk is Additionally,suppose that a dairy's variable costs are (where Q is the number of gallons of milk produced each day) ,its marginal cost is and there is an avoidable fixed cost of $50 per day.In the long run there is free entry into the market.Suppose the demand for milk doubles.If in the short run the number of firms is fixed and their fixed costs are sunk,what is the short run market supply function in terms of price?

• A) 40P if price is greater than $20
• B) P/4 if price is greater than $20
• C) 2.5P if price is greater than $20
• D) 300-10P

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Definitions:

General Equilibrium Analysis

An economic framework for understanding how supply and demand interact across multiple markets to determine prices in an entire economy.

Feedback Effects

The process where outcomes or outputs of a system loop back to influence the inputs or initial conditions, often amplifying or dampening effects in the system.

Partial Equilibrium

An analysis of equilibrium within a specific market or sector, ignoring interactions with other markets or the effects of changes in them.

General Equilibrium Analysis

An economic analysis that considers the simultaneous equilibrium of all markets in the economy.