Firm 1 will not produce anything if the market price is less than p1 while firm 2 will not produce anything if the market price is less than p2. For a market price greater than or equal to p1 but strictly less than p2, the market supply curve (Assume also that p2 is greater than p1) __________.
Answer & explanation
Correct answer: option 3
The correct answer is Option 3: coincides with the supply curve of firm 1
Here's how to determine the market supply curve:
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Understand the Conditions:
- Firm 1 produces if the price (p) >= p1.
- Firm 2 produces if the price (p) >= p2.
- We are considering the price range p1 <= p < p2.
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Analyze the Production:
- Since p >= p1, Firm 1 will produce.
- Since p < p2, Firm 2 will not produce.
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Determine the Market Supply:
- The market supply will be solely determined by Firm 1's supply, as Firm 2 will not produce in this price range.
Therefore, the market supply curve coincides with the supply curve of Firm 1.
The correct answer is ☀ coincides with the supply curve of firm 1.