Question

3. 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 Supply PRICE (Dollars per cat toy) AAAAAAAA+ COST (Dollars per cat toy) MC Demand 0 10 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of cat toys per year) 1 2 3 4 5 6 7 8 9 OUTPUT (Hundreds of cat toys per year) negative zero In the short run, the equilibrium market price is s per cat toy. At this price, each firm would earn Pos positive profit in the long run. Therefore, firms will be the industry when moving from the short run to the long run until the equilibrium market price is $ per cat toy. exit

please complete the LR line

Answer 1

Blank: 5, positive enter , 4 At long ng sun price: sun aggregate mc=AC . This p=4 supply is & horizontal at f= 4 un supply