High School

Gerardo's Geraniums is a flower farm specializing in the production of cut geraniums. The cut geranium market is a perfectly competitive market. Gerardo has hired an economist to determine his total cost function, which the economist reports as:

\[ TC(Q) = 50,000 + 0.0025Q \]

where \( Q \) is the number of cut flowers Gerardo's Geraniums produces.

1. Gerardo's Geraniums' marginal cost of supplying an additional cut geranium is: _____

*(Carefully enter your response as an algebraic expression, using the proper notation in the proper format.)*

2. Suppose that the price of a cut geranium is $2.00. Gerardo's Geraniums will supply _____ cut geraniums.

3. Suppose that the price of a cut geranium rises to $5.50. Gerardo's Geraniums will now supply _____ cut geraniums.

Enter your answer in each of the answer boxes.

Answer :

Final answer:

Gerardo's Geraniums' marginal cost is 0.0025, and because they operate in a perfectly competitive market as a price taker, they will supply as many cut geraniums as possible as long as market price exceeds marginal cost.

Explanation:

In a perfectly competitive market like the one that Gerardo's Geraniums operates in, the firm is a price taker, meaning it can sell any quantity at the prevailing market price. To determine the marginal cost of supplying an additional cut geranium, we need to analyze the total cost function TC(C). However, the given function seems to be incomplete. Assuming there's a typo and the complete function should probably be TC(C) = 50,000 + 0.0025C, where C is the number of cut geraniums produced. The marginal cost (MC) is the derivative of the total cost function with respect to C, which gives us MC = 0.0025.

Assuming the price is equal to the marginal cost, if the price of a cut geranium is $2.00, Gerardo's Geraniums will supply a quantity where price (P) equals marginal cost (MC), but since MC is constant and below the market price, theoretically, Gerardo could supply an unlimited number of cut geraniums, bounded only by their production capability. When the price rises to $5.50, the situation remains the same as long as the price exceeds MC, Gerardo's Geraniums would continue to supply as many geraniums as possible, subject to their production limits.