Attempts Average / 2 4. Moving from short-run to long-run equilibrium Suppose the competitive market for cat toys is in short-run equilibrium. The following graph on the left shows the demand and short-run supply for cat toys. Assume every firm in this industry is identical. The graph on the right shows the marginal cost (MC) and average cost (AC) curves for each firm in the long run. Short-Run Market Individual Firm 10 00 AC COST (Dollars per cat toy) PRICE (Dollars per cat toy) WA Supply MC N N Demand 0 0 10 20 30 40 50 60 70 80 90 100 0 1 2 3 4 5 6 9 10 QUANTITY (Thousands of cat toys per vear) OUTPUT (Hundreds of cat toys per vear)[n the short run, the equilibrium market price is per cat toy. At this price, each rm would earn zero V prot in the long run. Therefore, rms will exit V the industry when moving from the short run to the long run until the equilibrium market price is Do the foliowing graph, use the orange fine (square symbol) to graph the long-run supply curve for cat toys in this industry. @ 10 El LongRun Supply PRICE (Dollars per cat toy) Demand 0 l i l l l l i i l : 0102030405060708050100 QUANTITY (Thousands of cat toys per year)