A small nation has three gasoline suppliers with a linear monthly market demand equal to: Q = 500,000 - 5P

Economics Dec 09, 2020

A small nation has three gasoline suppliers with a linear monthly market demand equal to: Q = 500,000 - 5P. Each firm's marginal cost (MC) and average total cost (ATC) curves are horizontal at $10,000 per month.

What is the vertical intercept of the demand curve?

A. 100,000

B. 0.50

C. 500,000

D. 0.20

Expert Solution

The correct option is:

A. 100,000

At the vertical intercept, Q=0. Hence, it is P=1,00,000 is the vertical intercept.

Q=500000−5P

At Q=0

500000=5P

P=1,00,000

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