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Describe forces that will affect this situation in long run

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1. a) Describe in a few sentences how to derive the market's short-run supply curve from the individual firms' short-run MC curves.

b) Describe how to find the markets' long-run supply curve.

2. On the left-hand side of Figure E.7.2, you see the total market supply and demand. Together, they determine the market price, p*, and total quantity, Q*. On the right-hand side, you see a representative individual firm's marginal cost, MC, and average variable and average total cost, AVC and ATC.

The firm faces the price determined by the market, and therefore MR = p*.

a) Will this firm make a profit, a loss, or break even in the short run? Why? How much will it produce?

b) Describe the forces that will affect this situation in the long run. How will a long-run equilibrium arise? What will happen to p*? What will happen to the number of firms in the market? How will it affect this firm's and other firms' profits or losses?

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Reference no: EM13894391

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