Question

The market for cashews is perfectly competitive and comprised of fifty (50) firms with identical cost structures and U-shaped ATC curves. The market demand curve for cashews is downward-sloping. The industry is initially in long run equilibrium at the following market price and quantity P* = $4/pound Q* = 50 pounds of cashews In TWO, well-labeled graphs (side by side), depict this long run equilibrium for both the cashew market and for the individual cashew firm. Be sure to calculate and identify q* in your firm diagram even as you include any curve there necessary to prove this market is in long run equilibrium

Answer 1

The half first is half of the as follows: Question is not clear. The second A. a MC Mol Price broft / Ac. $4 -- - f - ET & exist 50 Quantity Market O ) Evin 2 Quantity The diagram depicts that initial equilibrium at point A pro Oftian D. PEATE MC - MR in leng 242 ) Option A since Total da so Total quantity produced by each - so 1. Livice - Pa AC, thus, profite are zero. Ac . 2 option I and I It will reduce cost of production and this shift, Mc and AC curne of the firms downwards. to Mc' and 22 iij Option ß. Ginen the price = $4, the quantity by indinidual produced firm increases to 'og' and firm starts I earning supernormal profits represented by red shaded area, 2 option B. The diagram depicts that elasticity of market demand is greater than 1. o i option A. Erine enter in the long run because economic profite are posituie. i) Option c. New market price = $2 in will be duantity firms Neue Option c. center, thus, market greater than loo pounds and number of firms will be greater than 50. great

d o number option of A. since constant elasticity firms will increase by is turo there, thus, tires