The graph below represents the short-run cost curves for a typical in a perfectl

Question

The graph below represents the short-run cost curves for a typical in a perfectly competitive industry. Suppose the industry is currently at its long-run equilibrium, such that firms are making economic profit of zero. Based on the graph, determine what the market price (and therefore marginal revenue) currently is . To the right of the cost graph, sketch a supply and demand graph representing the market conditions, assuming that there are 20 identical firms producing in this industry. On this graph, clearly indicate the market price and total quantity that will be sold in the market

Explanation / Answer

since firm is earning zero economic profit and in the long run equilibrium, price= min ATC = MC

price = $10

quantity produced by firm =30 units

if their 20 identical firms,

total quantity produced= no. of firms* quantity produced by firm = 20*(30) =600

market price=$10

so market demand curve and market supply curve will have equilibrium at p= 10 and quantity=600

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