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Your firm is one of many producers of aglets, those plastic coating thingamajigs that go on the end of shoelaces (they are NOT called
Your firm is one of many producers of aglets, those plastic coating thingamajigs that go on the end of shoelaces (they are NOT called flooglebinders, which was a nonsense word made up by a Tom Cruise character in a movie because he didn't know the actual word). Shoe companies, such as Nike and Adidas, don't really care which firm they buy from. Market demand is neither perfectly elastic nor perfectly inelastic. The firms producing aglets are generally identical because the production process hasn't changed in decades. The production function for each firm is q = 15.25 min), where q = thousands of aglets. There is only one firm, Cocktail, Inc., that produces the machines required to make aglets. Because of the complexity of running the aglet production equipment, Cocktail rents both the machines and trained workers to aglet production firms as a package deal. Cocktail will only sign one-year contracts. Assume ATC and AVC are "U-shaped" and that MC is not constant. A. (10 points) Your firm and the industry are in long run equilibrium. Illustrate current market demand and supply, and their relationship with the cost curves using appropriate graphs.
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