Question

Consider the following two graphs for a product produced in a perfectly competitive market (think, for example, corn or oats). The graph on top shows the market supply and demand functions for this product. The one at the bottom is the cost curves for a typical firm in the industry producing this product. These cost curves pertain to long run. As you know, in the long run firms can change the amounts of invested capital, new firms can enter the industry, and exiting firms can exit the industry. Therefore, in the long run, firms will choose the kinds and quantities of capital equipment that result in the lowest possible average cost. So, the lower graph shows the smallest possible average cost attainable in the long run in this industry. Moreover, again in the long run, if there is positive profit to be made in an industry, new firms will enter to take advantage of that profit opportunity. Conversely, if firms in an industry experience losses, some will leave the industry until the remaining firms make a normal profit. Assume that all the firms in this industry are of identical size (they produce the same amount of output). If any firm enters the market, it will also be of the same size as the incumbent firms.

Answer 1

5.the long run the equilibrium price of the product will equal 72 dollars per unit, theequelibrium quantity 3200 units,and there will be 11 firms in the industry each making an economic profit of 56 dollars

6.in the long run the equelibrium price will b 40 dollars per unit and the equelibrium quantity will be 3200 units,and there will be11 firms in the industry and making an economic profit of 56 dollars