Please explain sins only when its a perfect competitive market, p=mc but the question just say its competitive market so why are we saying p=mc? and it says the short run loss, what happens to the long run loss?

* Each of 1000 identical firms in the competitive peanut butter industry has a short- run marginal cost curve given by SMC; = 4 + Q. The demand curve for this industry is P = 10 - 1000 . What will be the short-run loss in producer and consumer surplus if an outbreak of aflatoxin suddenly makes it impossible to produce any peanut butter? ANSWER: Short-run supply curve is the horizontal summation of individual SMC curves, meaning for each value of SMC the market quantity will be a 1000 times individual quantity. We are given SMC; = 4 + Qi. Expressing Qi in terms of SMCi gives Qi = SMC; - 4. Total quantity for a particular value of SMC would be Q = 1000Q; = 1000SMC; - 4000. Given that in competitive markets P = MC, the supply curve is Q = 1000P - 4000, or P = 4 + Q/1000. Short-run equilibrium Q: 4 + -= 10- 2Q 30 - = 6 -> Q = 2000 = P =6 1000 1000 1000 P Consumer surplus 10 Producer surplus S 6 4 D Q 2000 Consumer surplus = area of the upper triangle = = . (10 - 6) . 2000 = 4000. Producer surplus = area of the lower triangle = = . (6 - 4) . 2000 = 2000