Question
Tim is a producer of Christmas trees in a perfectly competitive market that is currently in long-run equilibrium at the price of $50. At equilibrium
Tim is a producer of Christmas trees in a perfectly competitive market that is
currently in long-run equilibrium at the price of $50. At equilibrium quantity of
100 trees, Tim's average variable cost per tree is $35.
Draw a graph for both the industry and Tim's firm (include MR, MC, ATC,
and AVC).
i. Label the area of Tim's Total Revenue
ii. Label the area of Total Cost
iii. Label the shut down point
b. Describe Tim's firm in terms of the following:
i. Productive efficiency
ii. Allocative efficiency
c. With new graphs, show the results of an increase in demand for Christmas
trees on the following:
i. Price and quantity of Tim's firm in the short-run
ii. Price and quantity of Tim's firm in the long-run
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