Describe the competitive equilibrium price
Consider a competitive seller of iced coffee drinks. Suppose that this seller’s marginal cost of producing an amount of such drinks per week is given by the following. The first 200 drinks per week each cost €2, the next 100 drinks each cost €3, the next 100 drinks each cost €4, and each additional drink after that costs €5. Assume that the price of an iced coffee drink is €4.50.
(a) How many drinks will this seller produce during the week?
(b) What is this seller’s total surplus at this quantity what is the total difference between what the seller receives from selling the drinks and the cost of producing those drinks? Also, explain why this total surplus is the maximum surplus for this seller given the price.
(c) Suppose that there are 100 sellers of iced coffee drinks with exactly the same marginal costs as given above. Describe the total supply curve for all of these sellers, describe how many iced coffee drinks these sellers would want to sell in total at any possible price.
(d) Suppose these 100 sellers of iced coffee drinks are in a competitive market with 10000 consumers identical to person A and 2500 consumers identical to person B of the previous problem. Explain why €4.50 can be a competitive equilibrium price for such a market.
Are there other prices that could also be a competitive equilibrium price in this situation? Explain why and what they are, or explain why there cannot be any other equilibrium price.