Answer to Question #156904 in Economics for Muhammad Ammar Khan

Question

1.     In 2012, the box industry was perfectly competitive. The lowest point on the long-run average cost curve of each of the identical box producers was $4, and this minimum point occurred at an output of 1,000 boxes per month. The market demand curve for boxes was                                                                                                        2 marks

where P was the price of a box (in dollars per box) and Q_D was the quantity of boxes demanded per month. The market supply curve for boxes was

Where Q_S was the quantity of boxes supplied per month.

a.      What was the equilibrium price of a box? Is this the long-run equilibrium price?

b.     How many firms are in this industry when it is in long-run equilibrium?

1.     In 2012, the box industry was perfectly competitive. The lowest point on the long-run average cost curve of each of the identical box producers was $4, and this minimum point occurred at an output of 1,000 boxes per month. The market demand curve for boxes was                                                                                                        2 marks

where P was the price of a box (in dollars per box) and Q_D was the quantity of boxes demanded per month. The market supply curve for boxes was

Where Q_S was the quantity of boxes supplied per month.

a.      What was the equilibrium price of a box? Is this the long-run equilibrium price?

b.     How many firms are in this industry when it is in long-run equilibrium?

Answer 1

a. The equilibrium price of a box can be found from the equation Qd = Qs. It is not the long-run equilibrium price.

b. The number of firms in this industry in long-run equilibrium can be calculated by dividing the total market equilibrium quantity by the individual output of a firm.