Answer :

Given –


qD = 700 – p


qS = 500 + 3p for p ≥ 15


= 0 for 0 ≤ p < 15


From the given data we can see that the market supply is zero for the price range Rupees 0 to Rupees 15 because it is less than the minimum of average variable cost, so no firm will produce any positive level of output and the market supply curve will be zero.


At equilibrium, qD = qS


700 – p = 500 + 3p


200 = 4p


P = 50


Therefore, the equilibrium price is Rs 50.


At equilibrium price, the equilibrium quantity will be


qS = 500 + 3p


= 500 + 3 (50)


= 650 units.


Therefore, the equilibrium quantity is 650 units.


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