Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose that the monthly market demand schedule for Frisbees as well as the marginal and average costs of Frisbee production for every competitive firm are
Suppose that the monthly market demand schedule for Frisbees as well as the marginal and average costs of Frisbee production for every competitive firm are given in the following table. Graph the market demand curve and identify the market equilibrium, graph the firm's cost curves.and then answer five questions about production and profit. Finally, assume that the equilibrium market price is $6 per Frisbee. Monthly Market Demand Schedule for Frisbees Monthly Firm Output, Marginal Cost, and Average Total Cost a. Graph the market demand curve and identify the equilibrium price and quantity. b. Graph the firm's cost curves. market demand curve (plot 7 points total). Then using the tool provided 'E' identify the equilibrium price and quantity. In the right graph, use the tools provided 'MC' and 'ATC' to plot the firm's marginal cost and average total cost curves (plot 6 points for each curve, 12 points total). c. How many Frisbees are being sold in equilibrium? d. How many (identical) firms are initially producing Frisbees? e. How much profit is the typical firm making? In view of the profits being made, more firms will want to get into Frisbee production. In the long run, these new firms will shift the market supply curve to the right and push the price Instructions: In the left graph, use the tool provided 'Demand' to plot the down to average total cost, thereby eliminating profits. f. At what equilibrium price are all profits eliminated? g. How many firms will be producing Frisbees at this price
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started