Answered: Consider a perfectly competitive market…

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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Question

Consider a perfectly competitive market for wheat in New York City. There are 110 firms in the industry, each of which has the cost curves shown on the following graph:

The following graph shows the market demand for wheat.

Use the orange points (square symbol) to plot the short-run industry supply curve for the wheat industry. Specifically, place an orange point at the lowest point of the supply curve and another orange point at the highest point of the supply curve. (Note: You can disregard the portion of the supply curve that corresponds to prices where there is no output, since this is the industry supply curve. Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.) Then, place the black point (plus symbol) on the graph to indicate the short-run equilibrium price and quantity in this market. (Note: Dashed drop lines will automatically extend to both axes.)

At the current short-run market price, firms will________ in the short run. In the long run,some _______ the market given the current market price.

**Has not been answered. Only plugged in what I thought was the answer.**

Consider a perfectly competitive market for wheat in New York City. There are 110 firms in the industry, each of which has the cost curves shown on
the following graph:
COST (Cents per bushel)
100
90
80
70
60
8
40
30
20
10
0
0
ATC
AVC
MC
5 10 15 20 25 30 35 40
QUANTITY OF OUTPUT (Thousands of bushels)
45
50
?

The following graph shows the market demand for wheat.
Use the orange points (square symbol) to plot the short-run industry supply curve for the wheat industry. Specifically, place an orange point at the
lowest point of the supply curve and another orange point at the highest point of the supply curve. (Note: You can disregard the portion of the supply
curve that corresponds to prices where there is no output, since this is the industry supply curve. Plot your points in the order in which you would like
them connected. Line segments will connect the points automatically.) Then, place the black point (plus symbol) on the graph to indicate the short-run
equilibrium price and quantity in this market. (Note: Dashed drop lines will automatically extend to both axes.)
100
90
80
70
8
PRICE (Cents per bushel)
50
40
30
20
10
0
Demand
0 550 1100 1650 2200 2750 3300 3850 4400 4950 5500
QUANTITY OF OUTPUT (Thousands of bushels)
At the current short-run market price, firms will shut down
given the current market price.
-0-
Supply Curve
+
Equilibrium
in the short run. In the long run,
some firms will exit
the market

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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