5. Short-run equilibriumConsider a perfectly competitive market for wheat in Chicago. There are 120 firms in the industry, each of which has the cost curves shown on thefollowing graph:(?10090MC807060ATC504030AVC2010101520253035404550OUTPUT (Thousands of bushels)COST (Cents per bushel) 100Demand90Supply Curve807060Equilibrium503020106001200 1800 2400 3000 3600 4200 4800 5400 6000QUANTITY (Thousands of bushels)At the current short-run market price, firms willv in the short run. In the long run,the marketgiven the current market price.PRICE (Cents per bushel)

We are going to find the Supply schedule for 120 firms with the help of Supply schedule for a single…

5. Short-run equilibrium Consider a perfectly competitive market for wheat in Chicago. There are 120 firms in the industry, each of which has the cost curves shown on the following graph: 100 90 MC 80 70 60 ATC 50 40 30 AVC 20 10 5 10 15 20 25 30 35 40 45 50 OUTPUT (Thousands of bushels) CST (Cents per bushel)

5. Short-run equilibrium Consider a perfectly competitive market for wheat in Chicago. There are 120 firms in the industry, each of which has the cost curves shown on the following graph: 100 90 MC 80 70 60 ATC 50 40 30 AVC 20 10 5 10 15 20 25 30 35 40 45 50 OUTPUT (Thousands of bushels) CST (Cents per bushel)

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 7SCQ: If new technology in a perfectly competitive market brings about a substantial reduction in costs of...

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A market in perfect competition is in long-run equilibrium. What happens to the market if labor unions are able to increase wages for workers?
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Productive efficiency and allocative efficiency are two concepts achieved in the long mm in a perfectly competitive market. These are the two reasons why we call them perfect. How would you use these two concepts to analyze other market structures and label them imperfect?
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Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2 Marginal cost: MC = q where q is an individual firms quantity produced. The market demand curve for this product is Demand:QD = 120 P where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market. a. What is each firms fixed cost? What is its variable cost? Give the equation for average total cost. b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity? c Give the equation for each firms supply curve. d. Give the equation for the market supply curve for the short run in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market in the short run? f. In this equilibrium, how much does each firm produce? Calculate each firms profit or loss. Is there incentive for firms to enter or exit? g. In the long run with free entry and exit, what is the equilibrium price and quantity in this market? h. In this long-run equilibrium, how much does each firm produce? How many firms are in the market?