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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Suppose that the U.S. textile industry is competitive and there is no international trade in textiles. In long-run equilibrium, the price per unit of cloth is $30.

  1. a. Describe tire 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.

  1. 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.
  2. c. What is the long-run effect on the number of U.S. firms in the industry?

Subpart (a):

To determine
Impact of trade in the perfect competition.

Explanation

Figure -1 illustrates the equilibrium in the perfect market.

Subpart (b):

To determine
Impact of trade in the perfect competition.

Subpart (c):

To determine
Impact of trade in the perfect competition.

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