Recently, the spot market price of U.S. hot rolled steel plummeted to $400 per ton. Just one year ago, this same ton of steel cost $700. According to Metals Monitor, the drop in price was due to falling oil prices, along with a rise in cheap imports and excess capacity. These dramatic market changes have greatly impacted the supply of raw steel.

Suppose that last year the supply for raw steel was Q^s_raw= 600 + 4P, but this year it has shifted to Q^s_raw = 4,200 + 4P.

Assuming the market for raw steel is competitive and that the current worldwide demand for steel is Q^d_raw = 9,000 – 8P, compute the equilibrium price and quantity for the steel market one year ago, and the equilibrium price–quantity combination for the current steel market.

Price one year ago: $ ______

Quantity one year ago: _______

Price for current market: $ ______

Quantity for current market: ______

Suppose the cost function of a representative steel producer is C(Q) = 1,200 + 15Q².

How much raw steel does a representative firm produce when the market price is $700?________

How much raw steel does a representative firm produce when the market price is $400?________