Figure 14-7 Graph (a) Graph (b) MC ATC 1. D, Q, a, 0, 0: QUANTITY QUANTITY Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b). An increase in demand from Do to Di will result in a new market equilibrium at point X. an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z. rising prices and falling profits for existing firms in the market. falling prices and falling profits for existing firms in the market. PRICE PRICE

If there were 10 firms in this market, the short-run equilibrium price of steel would be $______per ton. At that price, firms in this industry would ______(shut down/operate at a loss/ earn a positive profit/ earn zero profit).  Therefore, in the long run, firms would__________(enter/ exit/ neither enter nor exit) the steel market. Because you know that competitive firms earn______(zero/ negative/ positive) economic profit in the long run, you know the long-run equilibrium price must be $_____per ton. From the graph, you can see that this means there will be_____(10/20/30) firms operating in the steel industry in long-run equilibrium.

Q27

QUESTION 6 Which of the following is a necessary condition for a firm to be able to bundle a new product with an existing one? consumers' willingness to pay for the two products are inversely related. the firm must operate in a perfectly competitive market. consumers must have a higher willingness to pay for the new product than for the older existing product. the two goods must be substitute products.

10 The industry in the figure given below on the left consists of many firms with identical cost structures, and the industry experiences constant returns to scale. a. Draw the short-run market supply curve up to 4,000 units of output. Instructions: Use the tool provided (SRMSC) to draw the short-run market supply curve. Plot three points total. b. Draw the long-run market supply curve from zero to 4,000 units of output. Instructions: Use the tool provided (LRMSC) tool to draw the long-run market supply curve. Plot only the endpoints across the entire output range (0 to 4,000). Price ($) 50 40 40 Typical Firm Market Price ($) 50 MC ATC 40 30 AVC 20 20 10 0 10 20 20 30 Quantity 40 40 50 50 30 20 20 10 0 D Tools / LRMSC SRMSC 1000 2000 3000 4000 5000 Quantity

The diagram to the right shows the long-run equilibrium for a competitive market for three different levels of demand (Do, D₁, and D₂). Assume that firms earn a normal level of profits at each market equilibrium. Illustrate the long-run industry supply curve. Using the line drawing tool, draw the long-run industry supply curve. Label this curve 'LRIS'. Note: Carefully follow the instructions above and only draw the required object. C Price per unit ($) 18.00- 16.00- 14.00- 12.00- 10.00- 8.00- 6.00- 4.00- 2.00- 0.00+ 0.0 Po -So 0.4 P₁ P₂ 0.8 1.2 1.6 2.0 Units of output, q (millions) 2.4 2.8

Looking to see how to resolve

10. In a competitive market, the current equilibrium price is $200 per unit. A firm that produces Q units of output in this market has a short-run Total Cost (TC) given by TC = 8000 + 40Q + Q². What is the marginal cost for this firm? How many units should the firm produce?

Answer the questions based on the table below - Complete the table below.  - In which market does this firm operate? Explain your reasons. - Determine the equilibrium output. Calculate whether the firm will it be earning a profit or suffering a loss at equilibrium.   Quantity(unit) Total Revenue($) Average Revenue($) MarginalRevenue($) TotalCost($) MarginalCost($) 1 10     5   2 18     11   3 24     16   4 28     20   5 30     23   6 30     25

Suppose that the jackfruit industry is initially operating in long-run equilibrium at a price level of $5 per pound of jackfruit and quantity of 75 million pounds per year. Suppose a leading foodie video blogger raises awareness for a scholarly article that links jackfruit consumption to premature hair loss and unhealthy skin. The viral video is expected to cause consumers to demand Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the viral video. PRICE (Dollars per pound) 10 9 8 7 co 01 2 1 0 0 15 Supply Demand jackfruit at every price. In the short run, firms will respond by 30 45 60 75 90 105 120 135 150 QUANTITY (Millions of pounds) Demand Supply ?