(Figure: Game-Day Shirts) Use Figure: Game-Day Shirts.Rick is one of 10 vendors who sell game-day T-shirts at football games in a perfectly competitive market.His costs are identical to the costs of the other 9 vendors.If the price of a shirt is $11,the short-run industry supply will be _____ shirts.

A) 140
B) 200
C) 220
D) 240

Question

Kendahl Keathley · Accepted Answer

Final Answer : C, Explanation :  In a perfectly competitive market, all firms have identical costs. Therefore, Rick's cost of producing a shirt is also $11. At this price, all firms would be willing to supply the market with the same quantity of shirts. The market supply curve is the horizontal summation of individual firms' supply curves. Since there are 10 identical firms, we can multiply the quantity supplied by one firm at this price by 10 to get the market supply. Each firm supplies where MC=MR (or P). At a price of $11, each firm would supply 20 shirts (based on the vertical line at P=$11 in the figure). So, the market supply would be 10 x 20 = 200 shirts. However, we need to add in Rick's supply to get the total quantity. Since Rick is one of the 10 identical firms, his supply at this price would also be 20 shirts. Therefore, the short-run industry supply of shirts at a price of $11 is 200 + 20 = 220 shirts.

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