Question

5. Moving from short-run to long-run equilibrium Suppose the competitive market for cat toys is in short-run equilibrium. The following graph on the left shows the demand and short-run supply for cat toys. Assume every firm in this industry is identical. The graph on the right shows the marginal cost (MC) and average cost (AC) curves for each firm in the long run. ? ? Short-Run Market Individual Firm 10 10 8 8 AC MC Supply 2 1 1 Demand 0 0 0 10 20 30 40 50 60 70 80 90 100 4 0 1 2 3 5 6 7 8 9 10 OUTPUT (Hundreds of cat toys per year) QUANTITY (Thousands of cat toys per year) PRICE (Dollars per cat toy) COST (Dollars per cat toy)

Answer 1

In shorteun Em prure= 3 4 fein produces runt & economie Cass=(7.5-3) 4 = 4.584 = $18. foim would con negative profit in layeun. ins will exit 4 lg market price = $6.5 lat doy SS yoooo