Consider the equilibrium depicted as your final short-run equilibrium (SRE). Is your price depicted in P2, a Long Run Equilibrium price for the natural gas industry? If so, explain why. If P2 is not a Long Run Equilibrium price, please explain what changes must take place to return the industry to long run equilibrium. As part of these changes, what, if anything, will happen to the supply curve, market price, the optimal output of an individual firm, the total number of firms in the industry, and the individual firm’s profit? assume the natural gas industry is perfectly competitive, demand is downward sloping, supply is upward sloping, and production technology results in traditional U-shaped ATC and AVC curves. market price is always greater than the minimum of the AVC curve.

Consider the equilibrium depicted as your final short-run equilibrium (SRE). Is your price depicted in P2, a Long Run Equilibrium price for the natural gas industry? If so, explain why. If P2 is not a Long Run Equilibrium price, please explain what changes must take place to return the industry to long run equilibrium. As part of these changes, what, if anything, will happen to the supply curve, market price, the optimal output of an individual firm, the total number of firms in the industry, and the individual firm’s profit? assume the natural gas industry is perfectly competitive, demand is downward sloping, supply is upward sloping, and production technology results in traditional U-shaped ATC and AVC curves. market price is always greater than the minimum of the AVC curve.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.7P

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Consider the equilibrium depicted as your final short-run equilibrium (SRE) in Question 3. Is your price depicted in Question 3, P2, a Long Run Equilibrium price for the natural gas industry? If so, explain why. If P2 is not a Long Run Equilibrium price, please explain what changes must take place to return the industry to long run equilibrium. As part of these changes, what, if anything, will happen to the supply curve, market price, the optimal output of an individual firm, the total number of firms in the industry, and the individual firm’s profit? Assume the natural gas industry is still living with the short-run supply disruption. Then unusually warm weather causes demand for natural gas to decrease unexpectedly. Analyze the impact of this reduction in demand in for natural gas. For this analysis, assume the natural gas industry is perfectly competitive, demand is downward sloping, supply is upward sloping, and production technology results in traditional U-shaped ATC and AVC…
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