Short run and long run equilibrium in fishing rod market

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Reference no: EM1317210

Continue with the fishing rod market. Assume that the minimum long-run average cost of making fishing rods (including an allowance for normal profit) is \$20 at an output per firm of 5,000 fishing rods and that market demand for these fishing rods is P = 50 - Q/20,000.

a) How would you predict that the short-run equilibrium that you have identified in question 1 will change?  Illustrate your answer using appropriate diagrams.

b) What will be the long-run equilibrium number of fishing rod manufacturers?

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