Suppose that the U.S. textile industry is competitiveand there is no international trade in textiles. In longrunequilibrium, the price per unit of cloth is $30.a. Describe the equilibrium using graphs for theentire market and for an individual producer.Now suppose that textile producers in other countriesare willing to sell large quantities of cloth in theUnited States for only $25 per unit.b. Assuming that U.S. textile producers have largefixed costs, what is the short-run effect of theseimports on the quantity produced by an individualproducer? What is the short-run effect on profits?Illustrate your answer with a graph.c. What is the long-run effect on the number of U.S.firms in the industry?
Suppose that the U.S. textile industry is competitiveand there is no international trade in textiles. In longrunequilibrium, the price per unit of cloth is $30.a. Describe the equilibrium using graphs for theentire market and for an individual producer.Now suppose that textile producers in other countriesare willing to sell large quantities of cloth in theUnited States for only $25 per unit.b. Assuming that U.S. textile producers have largefixed costs, what is the short-run effect of theseimports on the quantity produced by an individualproducer? What is the short-run effect on profits?Illustrate your answer with a graph.c. What is the long-run effect on the number of U.S.firms in the industry?
Chapter12: The Partial Equilibrium Competitive Model
Section: Chapter Questions
Problem 12.8P
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| Suppose that the U.S. textile industry is competitive and there is no international trade in textiles. In longrun equilibrium, the a. Describe the equilibrium using graphs for the entire market and for an individual producer. Now suppose that textile producers in other countries are willing to sell large quantities of cloth in the United States for only $25 per unit. b. Assuming that U.S. textile producers have large fixed costs, what is the short-run effect of these imports on the quantity produced by an individual producer? What is the short-run effect on profits? Illustrate your answer with a graph. c. What is the long-run effect on the number of U.S. firms in the industry? |
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