2019 Nov (Linear Demand Slope of Supply Output/Costs/Revenues Consumer Surplus) Paper 3 HL

2019 Nov 

(Linear Demand, Slope of Supply, Output/Costs/Revenues, Consumer Surplus) 

Paper 3 HL

(c) (i) Determine the slope of the market supply function for corn farmers in Nissos.

(ii) Calculate the monthly equilibrium quantity of corn in Noissos.

Equlibrium is where Qd = Qs

1. Find Price

10 - 0.5P = -2 + P

add +2 to each side

12 - 0.5P = P

add +.5P to each side

12 = 1.5P

P = 8

2. Insert P = 8 and solve Qd

Qd = 10 - 0.5P = 

10 - (0.5 (8)) = 

10 - 4 = 6

Qd = 6m at a Price of $8

3. Insert P = 8 and solve Qs

Qs = -2 + P = 

-2 + 8 = 6

Qs = 6m at a Price of $8

4. Q = 6 million

(d) (i) Plot and label Figure 1 the market demand curve and the market supply curve for corn in Nissos.

Qd = 10 - 0.5P

Step 1 - Make Qd/Qs zero and solve

Step 2 - Make P zero and solve

Step 3 - Plug in a number and solve

(ii) Draw and label the margonal revenue (MR) curve for corn for an individual farmer in Nissos on the grid below.

Understand that Perfectly Competitive firms have horizontal MR curves 

and they produce at Profit Maximization which is where the MR = MC.

(iii) Using Figure 1, calculate the consumer surplus in Nissos at the market equilibrium.

.5 x 6 (20 - 8) = $36m

1/2 x (6 x 12)

Area of Triangle = 1/2 (Base x Height)