6 Short Run Supply and LongRun EquilibriumSolutionThe short

6. Short Run Supply and Long-Run Equilibrium

Solution

The short run industry supply curve will be obtained by multiplying the amount each firm produces by number of firms in the industry. At $6 each firm produces 30000 output so if their are 20 firms in total they will produce 600000, 30 firms will supply 900000 output and 40 firms will supply 120000. Similar calculations needs to be performed for $1.5,$2.5, $4 and $9.

with 30 firms in market equilibruin price would be $6 per pound. Firms in the indusrtry would be making profit so in long run firms will enter the market.

In the long run firms earn Zero Economic profit . So long run equiblrium price would be $6 per pound and their wil be 30firms in the industry.

Graph is as follows