Chapter7: Perefect Competition
Section: Chapter Questions
Problem 10SQP
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Question
At the current short-run market price, firms will _____________ in the short run. In the long run, ___________ the market given the current market price.
Transcribed Image Text:Consider a perfectly competitive market for wheat in San Diego. There are 120 firms in the industry, each of which has the cost curves shown on the
ollowing graph:
(?
100
90
MC
80
70
60
ATC
50
40
30
AVC
20
10
10
15
20
25
30
35
40
45
50
QUANTITY OF OUTPUT (Thousands of bushels)
COST (Cents per bushel)
Transcribed Image Text: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 suppl
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-ru
equilibrium price and quantity in this market. (Note: Dashed drop lines will automatically extend to both axes.)
100
Demand
90
Supply Curve
80
70
60
Equilibrium
50
40
30
20
10
600
1200 1800 2400 3000 3600 4200 4800 5400 6000
QUANTITY OF OUTPUT (Thousands of bushels)
PRICE (Cents per bushel)
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