Answer to Question #122115 in Macroeconomics for Ruby vohra

Question

Suppose your locality has a number of momo stalls. Each vendor has a marginal cost of Rs 15 per plate of momo and no fixed costs. Suppose the maximum number of plates of momo that each vendor can sell is 100 per day.
a. If the price per plate of momo is Rs 10, the number of plates that each vendor will want
to sell is:
b. If the price per plate of momo is Rs 50, the number of plates that each vendor will want
to sell is:
c. Will the price remain at Rs 50 if the industry is assumed to be perfectly competitive?
d. If the answer to the above question is “no”, where will the price settle in the LR:

e. The demand function of momos is

Answer 1

a.0 plates per day

b.100 plates per day

c. No. Prices will change depending demand and supply.

d.Rs 10

e. Qd = a – b(P)

• Q = quantity demand
• a = all factors affecting price other than price
• b = slope of the demand curve
• P = Price of the good.