Question

6. Short-run perfectly competitive equilibrium Consider a perfectly competitive market for wheat in Philadelphia. There are 80 firms in the industry, each of which has the cost curves shown on the following graph: MC ATC COST (Cents per bushel) AVC 0 5 10 15 20 25 30 35 40 45 50

Answer 1

ecy competitve in pno duces A poodit per mapimizing t the poimt Whee Price mc. Tm Short hum ach irm's SuPply Cure is the rising poation o me above mimimum ANC.

Shont mom supply cumve of a tom prace (centa/busihel) 40 55 40 25 30/40 45 Guantity (thausanda ot) 35 bushela Indst utbly cunve is the homizomtal summation each individual's SR suppy cunve Price (oemts/bushel) Su Pply 40 55 Demand 40 25 2800 3200 2400 Guamtity thousands 3600 af bushels The curremt matket equihbrium paice is 10 cemts per bushel. fach fiam produces 45 thousand of busheb at that pmice. At this pne ft maimizing quanth Pice ATC, e. Tota revenue Total Ther e tare irns will earn positive ecomamic COst. bretit im the Shont hum. In the LR, this pretit will aftraCE Othen fians and toms wilL emten the mar ket, givem the cUmpent man ket prce