3. The egg industry is comprised of many firms producing an identical product. Demand and supply conditions are indicated in the left-hand panel of the figure below; the long-run cost curves of a representative egg producer are shown in the right-hand panel. Currently, the market price of eggs is $2 per dozen, and at that price consumers are purchasing 800,000 dozen eggs per day.

a. Determine how many eggs each firm in the industry will produce if it wants to maximize profit.

b. How many firms are currently serving the industry?

c. In the long run, what will the equilibrium price of eggs be? Explain.

d. In the long run, how many eggs will the typical firm produce?

e. In the long run, how many firms will comprise the industry?

Transcribed Image Text:

(a) Market Price ($) S $2- 1.50- 1 0.50 Price & cost ($/unit) $2 1.50- 0.50 D 0 800 1,200 1,600 2,000 2,400 Quantity (thousands of dozens) (b) Firm LMC LATC 0 1,000 2,000 2,300 2,400 Quantity (dozens)