Question

3. (25 points) Consider two firms out of a competitive industry. They have the following technologies: C1(y) = y^2+2y; C2(y) = 1.5y^2 + 3y. Show these firms’ individual supply functions on a clearly-labelled graph. Construct an aggregate supply function for these two firms on your graph. 

Answer 1

$C_1=C_2,$

$y^2+2y=1.5y^2+3y,$

$0.5y^2-y=0,$

$y=0$ or $y=2.$