Answer to Question #242902 in Microeconomics for mosharof

Question

What would the supply curve for supermarkets (in a given city) look like for a

time period of (a) the next twelve hours and (b) the next five months? Explain with

relevant graph.

Answer 1

Solution:

a.). The next twelve 12hrs

The next twelve hours refer to the short-run supply curve.

Supermarkets fall under perfect competition where the short-run supply curve is the marginal cost (MC) curve at and above the shutdown point which is the average variable cost (AVC).

The supply curve in the next twelve hours is upward sloping and it is that portion of the marginal cost curve that lies above the average variable cost (AVC) curve.

 

This is displayed by the below graph:

 

 

b.). The next five months.

The next five months refer to the long-run supply curve.

In the long run, the price will be equal to the MR, AR, and demand. The supermarkets will produce only at the minimum average cost in the long run. The long-run marginal cost, marginal revenue, average revenue, and the long-run average total cost will all be equal.

The long-run supply curve will be that portion of its long-run marginal cost curve that lies above the minimum point of the long-run average total cost (ATC) curve.

 

This is displayed by the below graph: